Tokenised gold could be exempt from fund regulations under FCA proposal

The UK's Financial Conduct Authority (FCA) is considering regulatory exemptions for tokenised gold to enhance London's role as a leading global bullion hub. Under proposals developed alongside the UK Treasury and the Bank of England, tokenised gold and broader tokenised commodities could receive a bespoke regulatory framework, exempting them from collective investment scheme (CIS) and alternative investment fund (AIF) rules that currently restrict institutional participation. The initiative aims to unlock London's physical bullion reserves by enabling digital tokens backed by physical bars to serve as collateral in financial transactions, clearing, and settlement. The UK currently handles approximately 70 percent of global gold trading volume, but faces rising competition from international financial centers such as China. In tandem, the Bank of England is evaluating the inclusion of tokenised assets as eligible collateral in its Sterling Monetary Framework and plans to consult on allowing central counterparty clearing houses to accept tokenised collateral. This broader market modernisation push seeks to optimize capital efficiency across wholesale financial markets.