Why the UK financial watchdog is drafting new rules for tokenized gold
The UK's Financial Conduct Authority is drafting new regulations for tokenized gold to encourage market growth and modernize wholesale financial markets. This initiative aligns with the government's broader 12-month plan to digitize the country's financial sector.
Why it matters
Regulatory clarity on tokenized assets is a critical step for institutional adoption of blockchain technology in traditional finance.
The Financial Conduct Authority (FCA) approached financial institutions to explore tokenized gold regulations to foster market growth, the Financial Times reported Monday, citing people familiar with the plans .
London’s over-the-counter market (OTC) market has historically ranked as the number one center for gold trade and currently accounts for 70% of the world’s notional trading volume, according to the World Gold Council . However, London’s dominance is being increasingly challenged by China.
The tokenization of gold is the process by which digital tokens are created to represent ownership rights in physical gold, with the token issuer holding the gold as backing.
The FCA, which has also discussed digitizing the wholesale financial markets, is seeking feedback on the role tokenized gold could play as collateral in wholesale markets and is expected to announce progress on drafting new rules for tokenized digital assets within the next few months, the report said.
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