FCA Mulls Bespoke Rules for Tokenized Gold Funds
The UK Financial Conduct Authority is considering tailored regulations for tokenized gold products, including potential exemptions from certain fund rules, according to a Financial Times report. The move comes as industry participants warn that regulatory uncertainty could slow development and limit investor access to these novel instruments.
Tokenized gold, which represents physical bullion on a blockchain, has gained traction globally as a way to trade and hold gold more efficiently. But in the UK, existing fund rules were not designed for digital assets, creating ambiguity for issuers and distributors.
Why UK Fund Rules Create a Tokenized Gold Bottleneck
Current UK fund regulations, particularly those governing authorized funds and collective investment schemes, impose strict custody, diversification, and liquidity requirements that tokenized gold products may struggle to meet. For instance, a tokenized gold fund that holds physical bars in a vault might be classified as a commodity fund, triggering additional restrictions.
Industry participants told the FT that without clear guidance, issuers are hesitant to launch products in the UK, fearing enforcement action or costly compliance burdens. This could leave UK investors without access to a fast-growing segment of the digital asset market.
The FCA’s consideration of bespoke rules suggests it recognizes the potential benefits of tokenized gold, such as fractional ownership, 24/7 trading, and reduced settlement times. However, the regulator must balance innovation with investor protection.
Tokenized Gold Market Grows Despite Regulatory Haze
Globally, tokenized gold has seen significant adoption. Leading products include Paxos Gold (PAXG) and Tether Gold (XAUT), which together account for the majority of the market.
These tokens are backed by physical gold stored in vaults, offering investors a way to gain exposure to gold prices without the logistical challenges of physical ownership. In the UK, however, regulatory clarity has lagged, with no major tokenized gold product approved for retail distribution.
The FCA’s review could change that. If the regulator introduces bespoke rules or exemptions, it could open the door for UK-based issuers and attract global players to the market.
What the FCA’s Decision Could Mean for Gold and Crypto Markets
Gold prices have been volatile in 2026. Tokenized gold products typically track the spot price, minus fees, so regulatory clarity could boost their appeal as an alternative to traditional gold ETFs like SPDR Gold Shares (GLD).
For the crypto market, the FCA’s move signals a potential shift toward more nuanced regulation of digital assets. The UK has been striving to position itself as a hub for fintech and crypto innovation post-Brexit, but has faced criticism for being slow to adapt rules.
If the FCA grants exemptions, it could encourage other jurisdictions to follow suit, further legitimizing tokenized commodities. However, if the regulator imposes overly stringent requirements, it could stifle innovation and push issuers to more favorable jurisdictions like Switzerland or Singapore.
Investor Access Hinges on FCA’s Next Move
The FCA is expected to publish a consultation paper on tokenized assets in the coming months, though no official date has been set. Industry participants are watching for signals on whether tokenized gold will be treated as a security, a commodity, or a new asset class.
A key number to watch is the minimum investment threshold for tokenized gold products. If the FCA sets it too high, retail investors could be locked out, defeating one of the main advantages of tokenization.
Additionally, the regulator’s stance on custody requirements will be critical. Tokenized gold relies on third-party custodians to hold the physical metal, and any mishap could undermine confidence. The FCA will need to ensure robust safeguards.
For now, the market awaits clarity. The FCA’s decision could either accelerate the UK’s role in tokenized commodities or leave it trailing behind more proactive regulators.
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