UK FCA call for input on tokenised gold

The UK Financial Conduct Authority (FCA) has published a call for input on whether tokenisation could improve the trading, transfer, mobilisation and use of gold as collateral while maintaining market integrity and consumer protection. The call follows feedback received in response to the FCA's and Bank of England's joint call for input on tokenisation, recognising gold as a significant potential use case given the international strength of the London spot gold market, and the increase in tokenised gold and other gold-related products in recent years.

In terms of scope, the FCA acknowledges a number of key questions around the regulatory perimeter and the status of gold as a commodity, and states that its objective is not to regulate segments of the gold trading market that fall outside the FCA's current remit. The call focuses on gold products that confer ownership rights in underlying physical gold which are clearly defined and have reliable redemption arrangements.

The call for input considers the legal, regulatory and operational conditions needed to support the safe and effective use of tokenised gold, including its incorporation in wholesale market use cases, and the development of industry-led market standards to improve interoperability. Like many recent initiatives from the UK government and regulators, it highlights the increasing momentum behind the development of tokenised asset markets and the importance that industry places on unlocking the use of tokenised securities and commodities in particular for collateral and settlement purposes. As tokenised gold may engage multiple regulatory regimes depending on the use case and participants involved, the FCA is seeking views on areas that may present challenges.

In addition to collateral and settlement, another specific area the FCA seeks feedback on is whether uncertainty around the collective investment scheme and alternative investment fund regimes regulatory perimeter may affect the development of certain use cases for tokenised gold, and whether regulatory clarification or alternative policy measures may be appropriate. The regulator raises two policy options that could be pursued: the first being clarification of the existing regulatory perimeter; and the second being a potential targeted exemption from those regimes for the benefit of gold market infrastructure.

The deadline for comments is 23 October. Alongside this call for input, the FCA, together with the Bank of England, published a feedback statement setting out their joint ambition to support tokenisation in the UK's wholesale financial markets. We cover this in more detail in the securities section below.

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