UK Financial Conduct Authority plans regulatory framework for tokenized gold

Britain’s top financial regulators have put tokenized gold on the map, literally. In a joint vision paper published on May 18, the Financial Conduct Authority, the Bank of England, and the Prudential Regulation Authority outlined how tokenized gold could be used as collateral in over-the-counter derivatives trades. The goal: make traditional markets faster, cheaper, and more flexible by putting real-world assets on digital rails.

The paper doesn’t create a brand-new regulatory category for tokenized gold. Instead, it folds tokenized assets into the existing framework under UK EMIR, the post-financial-crisis rules governing derivatives clearing and collateral. Under this approach, a bar of gold and its tokenized twin get the same regulatory treatment. No special privileges, no extra hurdles.

Same asset, different wrapper

The PRA made the principle explicit in a Dear CEO letter accompanying the vision paper. Tokenized traditional assets should receive the same prudential treatment as their non-tokenized counterparts, regardless of the underlying technology or blockchain used.

Under UK EMIR, there is no distinction between tokenized and conventional instruments for collateral eligibility. That means a tokenized gold position could, in theory, satisfy margin requirements for uncleared OTC derivatives trades, the same way physical gold or government bonds do today.

The sandbox and what comes next

The vision paper doesn’t exist in a vacuum. It builds on several parallel workstreams the UK has been running over the past year. Sixteen firms are currently working with regulators through the Digital Securities Sandbox, a controlled environment for testing the issuance and settlement of tokenized assets under real-but-supervised conditions.

The FCA also issued a policy statement in April confirming that authorized funds can invest in tokenized forms of eligible assets. That opened the door for fund managers to hold tokenized gilts, equities, or commodities without falling afoul of existing investment rules.

On the infrastructure side, the Bank of England has its own timeline. The central bank plans upgrades that would enable direct digital ledger connectivity by 2027, with a live synchronization service expected to go online in 2028.

The FCA ran a call for input on the broader tokenization initiative, which concluded on July 3. A feedback statement is expected later this summer.

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