Britain’s Financial Conduct Authority (FCA) is considering setting up a separate regulatory framework for tokenised gold rather than applying existing fund rules as they are. The move is aimed at using London gold, the world’s largest hub for spot physical gold trading, as collateral in digital financial markets.
On Sept. 14, Cointelegraph and the FCA said the regulator has begun gathering industry views on whether tokenised gold can improve efficiency in trading, transfer, collateral creation and custody. It highlighted uncertainty over whether tokenised gold falls under current collective investment scheme (CIS) or alternative investment fund (AIF) rules as a key issue. The FCA is also considering issuing separate guidance or creating a dedicated regulatory framework for tokenised gold. No final decision has been made.
Tokenised gold represents ownership or rights to physical gold as blockchain-based digital tokens. It can allow gold to be split into small units or transferred quickly without moving the physical metal, improving efficiency for trading and collateral use. The FCA is particularly focusing on the possibility that gold stored in London could be used more widely as collateral in wholesale financial markets.
The review extends Britain’s policy on tokenising wholesale financial markets. The FCA and the Bank of England in May jointly set out measures to expand the issuance, trading and settlement of tokenised securities and their use as collateral. The Bank of England is also working to allow tokenised versions of existing eligible assets to be used as collateral for central counterparties and central bank transactions. The FCA also plans to draw up a joint tokenisation roadmap reflecting industry views within this year.
London’s market position is also cited as a factor. The World Gold Council (WGC) said the London over-the-counter (OTC) market has traditionally been the centre of global gold trading, accounting for about 70 percent of global notional trading volume.
The key is regulatory clarity. A decision on whether to treat tokenised gold the same as existing funds or to handle it separately as a new type of digital commodity asset is expected to affect the pace of the London gold market’s shift to blockchain.
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