London Considers Exempting Tokenized Gold From Fund Rules

The Financial Conduct Authority is examining whether tokenized gold should be exempted from the rules that govern investment funds, and is exploring a bespoke framework with the Treasury to do it, CoinDesk reported. The stated motivation is competitive: London is the centre of the global physical bullion trade, and the regulator is looking at whether the current perimeter pushes digital gold products offshore.

Why gold keeps tripping over fund law

A tokenized gold product is usually a claim on allocated bullion sitting in a vault, with a token representing a fixed weight of metal. Legally, that structure can look uncomfortably like a collective investment scheme, a pooled vehicle where investors' money is managed together and which carries authorisation, disclosure and operator requirements designed for funds that buy and sell things on your behalf. A warehouse receipt does not do that. It sits there and represents metal.

The mismatch is not new. Physical gold exchange-traded products have spent two decades being fitted into fund regimes that were built for portfolios of securities. What is new is that tokenized bullion settles continuously, in fractions, to anyone with a wallet, which makes the question of whether it is a fund unit or a commodity receipt a live operational one rather than a drafting curiosity.

The defensive logic

CoinDesk framed the FCA's interest as a move to defend the London market. That framing is worth taking at face value. London's bullion trade runs on loco London settlement, unallocated accounts and a clearing system built over more than a century, and none of that is inherently digital. If the tokenized version of the same exposure is easier to issue in Singapore, Zurich or Dubai, the activity does not wait for the regulation to catch up.

A carve-out would not change what the product is. It would change who can issue it in the United Kingdom without authorisation as a fund operator, and that is usually the binding constraint on whether an instrument exists at all in a given jurisdiction.

Where this sits in the tokenization stack

Gold is the least contentious real-world asset to put onchain, which is precisely why it keeps arriving first. There is no issuer with a view on the matter, no voting rights, no corporate actions and no dividend. The only questions are custody, audit and redemption, and all three have settled answers in the physical market. Equities, by contrast, drag in shareholder registers and issuer consent, arguments that are still being had.

That makes a gold carve-out a reasonable first test of whether a regulator can write bespoke rules for a tokenized asset rather than forcing it into an existing category. If it works for bullion, the template is available for other bearer-like claims. If it stalls, the reason will tell you a good deal about how much appetite there is for new perimeters rather than reinterpreted old ones.

What to watch

Nothing is decided. The FCA is exploring a framework, and the Treasury would have to move for any exemption to bite, since the collective investment scheme perimeter is set in legislation rather than in the regulator's own handbook. The next observable step is a consultation paper or a statement of policy intent naming digital gold specifically.