FCA explores tokenised gold as collateral amid London bullion competition

The Financial Conduct Authority (FCA) is in early discussions with banks about permitting tokenised gold to serve as collateral in wholesale markets, according to a Financial Times report. The conversations sit within the UK’s wider effort to modernise wholesale financial infrastructure as London contends with increasing competition from Shanghai and Hong Kong as bullion trading centres.

HSBC already supports institutional trading of tokenised gold through its Evolve platform, covering foreign exchange and precious metals. Trading, however, is the more straightforward half of the ambition. The deeper goal, articulated last year by the World Gold Council in its wholesale digital gold initiative, is collateral mobility: a tokenised representation of a gold bar could theoretically be pledged as collateral without requiring the physical movement of the underlying metal. That prospect reduces friction considerably for treasury and funding operations.

The regulatory path is complicated by how UK law currently frames physical commodities. Under the Financial Services and Markets Act (FSMA), Recognised Investment Exchanges such as the London Metal Exchange, ICE Futures Europe, and LIFFE are exempt from FCA authorisation requirements and act as front-line regulators of their own markets. FCA guidance goes further, stating explicitly that operating warehouses licensed by those exchanges does not constitute a regulated activity. The authority’s interest in warehousing is largely indirect, anchored to the need for exchange-traded derivatives to reference the price of the physical commodity. Bridging that regulatory gap between physical commodity infrastructure and tokenised representations of it is the central question the FCA’s exploration has yet to resolve.