UK FCA Drafts Tokenized Gold Rules to Defend London's Global Trade Dominance

Woofun AI reports that the Financial Conduct Authority (FCA) is actively drafting regulations for tokenized gold, a strategic move attributed to the U.K. Treasury's push to secure London's position as the premier global hub for precious metal trade. This regulatory effort, highlighted by the Financial Times, involves direct engagement with financial institutions to foster market growth under the guidance of key figures including Chris Woolard and Simon Walls.

London's over-the-counter market (OTC) has historically served as the central node for gold commerce, accounting for 70% of the world's notional trading volume according to the World Gold Council.

However, this entrenched dominance faces intensifying competitive pressure from China, prompting the need for structural adaptation.

The deeper driver is the necessity to modernize legacy infrastructure to maintain relevance in a shifting geopolitical landscape.

Per Woofun AI, the U.K. Treasury outlined a 12-month plan in July to accelerate financial market digitization, projecting an annual economic output boost of 33 billion pounds ($44 billion). This follows earlier announcements in May by the FCA and the Bank of England regarding market modernization. The regulator is expected to announce progress on new rules for tokenized digital assets within the next few months, though it had not responded to requests for further comment.

Structurally, tokenization involves creating digital tokens representing ownership rights in physical gold, with issuers holding the metal as backing. The FCA is currently seeking feedback on using these tokens as collateral in wholesale markets. While gold hit an all-time high of roughly $5,595 a troy ounce in January, prices have since slipped to about $4,340, underscoring the volatility these new frameworks must address.