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FollowingPotential application scenarios for tokenized gold
As a physical asset, the physical transfer of gold is often more complex than stocks or bonds. The Financial Conduct Authority (FCA) believes that tokenization technology can make gold easier to divide and transfer in digital markets.
Bank of England reviews collateral rules
Currently, some digital asset markets have used gold-backed tokens as collateral. As of the end of August, lending platform Aave had fully utilized its $25 million Tether Gold mortgage facility. Another company, Arch Lending, has also begun accepting tokenized gold with value ratios of up to 75%. These cases show that tokenized gold has been tested in practical financial uses.
At the same time, the Bank of England is studying whether tokenized assets, including stablecoins, can be recognized as eligible collateral under the framework of its sterling monetary policy. The framework is the mechanism by which the central bank provides funds to financial institutions. In addition, the Bank of England plans to consult later this year on whether to allow clearing houses to accept tokenized assets as collateral.
FCA considers exemptions from fund rules
The UK Financial Conduct Authority (FCA) is evaluating whether tokenized gold products should be exempted from UK fund rules covering collective investment schemes and alternative investment funds. Regulators plan to release the results of their deliberations on Monday. The FCA is working with the Treasury and the Bank of England to study whether to develop a specific regulatory framework for tokenized gold and, more broadly, tokenized goods.
There is no final decision yet. Companies in the industry have told the FCA that it is unclear whether tokenized gold is subject to such rules, making it difficult for companies to determine which investors can buy relevant products. Jon Relleen, director of infrastructure and exchanges at the FCA, said that tokenization of gold has become a topic of great concern in exchanges with the industry. Regulators want to know whether current rules still apply to the gold market.
Global gold trading pattern and future outlook
According to data from the World Gold Council, the UK currently accounts for about 70% of the world's gold trading volume. London is under pressure to maintain its lead as China strives to build its own gold trading hub. Although tokenized gold products already exist outside the UK (such as Tether Gold and Pax Gold, which had a combined market value of approximately US$4.4 billion in July), regulatory rules vary in different regions. Gold-backed tokens are classified as asset reference tokens under the EU Cryptographic Asset Markets Regulation, but as of July, no such token has been approved.
This research work is closely linked to other UK projects. In July this year, the British government chose HSBC's Orion platform to issue its first digital government bond (digital gilt bonds), which is expected to be launched in early 2027. Currently, sixteen companies are participating in the UK's "digital securities sandbox", where regulators are testing longer trading times and a more round-the-clock settlement system.
Research cited by British regulators shows that U.S. market participants hold about 7% more collateral than they actually need, simply as a safety buffer. Officials believe digital tools are expected to reduce this additional buffer need over time. The FCA will announce its full proposal on Monday. Any exemptions will still need to be further negotiated with the Ministry of Finance before they become formal policy.
