UK FCA drafts rules for tokenized gold as bank collateral

The Financial Conduct Authority (FCA) is developing a regulatory framework for tokenised gold, a digital version of the metal that could be used as collateral in wholesale markets, according to a report from CoinTelegraph. The framework will set rules for how tokenised gold is issued, traded and backed, and it will address how such assets can be used in borrowing and lending arrangements between banks and other large financial firms.

Tokenisation has grown rapidly as investors and issuers look for ways to combine the liquidity and speed of digital assets with the safety of traditional commodities. Gold has long been a trusted store of value and a standard collateral in central bank and inter‑bank markets. By turning physical gold into a blockchain‑based token, institutions could settle trades faster, reduce paperwork and lower the cost of custody. The move comes after regulators in the United States, Singapore and Switzerland announced similar guidelines for digital assets, and after several UK banks began testing gold tokenisation for internal use. The FCA’s new rules will help prevent fraud, ensure proper asset backing and protect investors while keeping the UK competitive in the evolving digital‑asset landscape.

Under the proposed rules, tokenised gold would be issued by licensed asset managers and must be fully backed by physical gold held in secure vaults. The FCA will set standards for the technology platform, verification of ownership, and the process for converting tokens back into physical gold. It will also outline how tokenised gold can be recognised as collateral for loans and repurchase agreements. The framework is expected to clarify tax treatment, anti‑money‑laundering obligations and cross‑border settlement issues that have previously created uncertainty for market participants.

The FCA will publish a consultation paper in the coming months and aims to have the framework in place by the end of 2025. Market players will need to adapt their systems to meet the new requirements, and issuers of tokenised gold will have to prove the integrity of their vaults and custody arrangements. If successful, the UK could become a leading hub for digital‑asset collateral, attracting banks and fintech firms that want to combine the safety of gold with the efficiency of blockchain technology.