UK FCA Builds Tokenized Gold Framework to Defend London's 70% Share of Global Bullion Trade

London controls roughly 70% of global gold trading. The UK Financial Conduct Authority intends to keep it that way, and it is betting on blockchain to do it.

The FCA is in active discussions with major banks and industry participants to build a dedicated regulatory framework for tokenized gold trading, according to a Financial Times exclusive. The initiative sits inside Britain's broader push to modernize its financial infrastructure and cement London's institutional role as digital asset rails begin to replace legacy settlement systems across traditional markets.

Tokenized gold refers to blockchain-based digital tokens that represent claims on physical gold held in custody. Unlike speculative crypto assets, these instruments are backed one-to-one by allocated or unallocated bullion, making them directly relevant to the London Bullion Market Association (LBMA), which underpins the city's outsized share of the global market. By establishing a clear regulatory perimeter for these instruments, the FCA would give institutional participants, including the major clearing banks, the legal certainty they need to integrate tokenized gold into their existing trading workflows.

The timing is deliberate. Financial centers including Singapore, Hong Kong, and Dubai are each developing their own frameworks for tokenized real-world assets, and gold is among the most commercially attractive candidates given its deep liquidity and established custody infrastructure. A fragmented global landscape, where each jurisdiction writes its own rulebook, could produce incompatible standards that erode rather than entrench London's advantage. The FCA's move to engage banks directly before publishing formal rules suggests the regulator is trying to shape an interoperable standard from the front rather than react to market developments after the fact.

That approach carries risks. Critics of tokenized gold frameworks point out that compliance costs and technical requirements could concentrate trading activity among the largest institutions, squeezing out smaller bullion dealers and market makers who currently contribute to London's liquidity depth. Smart contract vulnerabilities and cybersecurity exposure also represent systemic concerns that any framework will need to address explicitly, particularly given that a breach affecting tokenized gold custody could have consequences across the physical market as well. Traditional bullion traders, whose workflows are built around physical settlement and LBMA good delivery standards, may resist a transition that introduces new counterparty and technology risk.

The FCA's initiative fits a broader pattern of regulators moving to bring blockchain infrastructure inside established financial perimeters rather than treating it as a separate asset class. Where some markets have struggled to define whether crypto instruments qualify as securities or commodities, the UK is approaching tokenized gold as a modernization of an existing, well-understood market with established ownership rights and custody norms. That framing may make it easier to move quickly through consultation and into formal rulemaking.

No timeline for a published consultation paper or final rules has been disclosed. The discussions with banks are ongoing, and the FCA has not made a formal public statement on the framework's scope. What is clear is that the regulator views tokenized gold not as a crypto experiment but as infrastructure policy, one where London's historical dominance in bullion trading gives it both a commercial incentive and a credible institutional base from which to set a global standard.