London's gold market has run on the same playbook for decades: bars in vaults, paper contracts, settlement through LBMA clearing members. But the roughly 70% of global over-the-counter gold trading that flows through the city is now facing competition from exchanges in China, and the Financial Conduct Authority wants to know whether outdated rules are holding London back in the digital era.
The issue is tokenized gold — digital tokens that give holders a claim on a specific amount of physical metal sitting in a vault, redeemable on demand. The trouble is that UK law doesn't clearly say what such a token actually is: a share in a collective investment scheme, an alternative investment fund asset, or something else entirely. While that classification stays murky, plenty of institutional investors simply won't touch the tokens.
The FCA has floated a few ways out: clarifying the existing rules, creating a dedicated classification for these products, or building an entirely separate regulatory regime for tokenized commodities. 'We're keen to understand whether existing regulatory frameworks remain the right fit for gold markets,' said Jon Relleen, the FCA's director of infrastructure and exchanges. Feedback from the industry is open until October 23, with a roadmap and concrete timelines promised later this year.
The move isn't happening in isolation. Britain and the US agreed in July to align their rules on tokenized finance, and an earlier joint consultation by the Bank of England and the FCA drew 123 responses — with collateral use cited most often as the practical reason firms want tokenized assets in the first place.
If London writes the rulebook for tokenized gold before anyone else does, it won't just be defending market share — it could end up setting the standard the rest of the world trades against.
