British FCA working on rules for tokenised gold

The British financial regulator FCA is working on rules for tokenised gold. The authority is holding talks with major banks and other parties from the sector on how this market can be regulated, with the aim of both stimulating the digitalisation of financial markets and preserving London’s dominant position in the global gold trade.

In brief:

• The FCA is discussing a regulatory framework for tokenised gold with banks and market participants.
• Tokenised gold could potentially serve as collateral in wholesale markets.
• London currently processes approximately 70% of the global gold trading volume.

London wants to strengthen position in gold trade

London has been the centre of the global gold trade for decades, processing an estimated 70% of all gold transactions worldwide. To maintain that leading role in an increasingly digital financial world, the FCA is focusing on developing clear rules around tokenised gold. That is reported by the Financial Times based on sources familiar with the regulator’s plans.

Through tokenisation, physical gold is converted into digital tokens on a blockchain, which can make transactions faster, cheaper and more transparent. The FCA sees an opportunity here to improve the efficiency of the market, but wants to do so within a clear supervisory framework so that risks remain manageable.

Tokenised gold as collateral in wholesale markets

One of the concrete applications emerging from the talks is the use of tokenised gold as collateral in so-called wholesale markets, or the wholesale markets for financial institutions. This would give banks and other parties more flexibility in hedging positions and managing liquidity.

The standards that emerge from this process are expected to be announced in the coming months. It is part of a broader British strategy to digitalise financial markets and keep London attractive as an international financial centre, especially as competitors such as Singapore and Dubai are strongly focusing on crypto and digital assets.