UK’s FCA Says Fund-Rule Uncertainty Could Hold Back Tokenized Gold Adoption

The UK’s Financial Conduct Authority says it isn’t yet clear whether tokenized gold products should be treated as regulated investment funds under British law — and that uncertainty, the regulator warns, could shape whether the products ever gain real traction with investors.

The FCA published a formal call for input on September 14 asking the industry to weigh in on whether tokenization could improve how gold is traded, transferred, pledged, and held in UK markets, including its potential use as collateral in wholesale finance. At the center of the consultation is a specific legal ambiguity: some tokenized gold products may fall within the perimeter of the UK’s collective investment scheme (CIS) rules or its alternative investment fund (AIF) regime, and in some cases it isn’t obvious which category applies, if either does. The FCA said that ambiguity, or an unfavorable classification, could affect whether institutional and retail investors are willing or even permitted to hold the tokens at all.

London currently handles roughly 70% of global gold trading volume, giving the FCA a direct incentive to get the framework right rather than watch tokenized gold activity migrate to jurisdictions with clearer rules. The regulator is weighing several possible paths forward: clarifying how existing CIS and AIF rules apply to specific tokenized gold structures, creating a recognized classification carved out for this purpose, or pursuing more targeted rule or legislative changes tailored to the asset class. No option has been chosen yet — the call for input is explicitly about gathering industry feedback before the FCA commits to a direction, with responses due by October 23.

The consultation builds on a broader Call for Input the FCA and the Bank of England published jointly in May on tokenization across wholesale financial markets, which drew 123 industry responses. Both regulators have said they intend to publish a fuller tokenization roadmap later this year, with specific target dates for individual workstreams — of which the gold-specific question is now one clearly delineated piece.

Industry participants who have discussed the issue publicly have focused heavily on gold’s potential use as collateral in wholesale markets, since that use case demands more than just a token representing ownership — it requires clear legal title, a dependable redemption path back to physical metal, and liquidation mechanics that function reliably inside the tight timeframes of a margin call. Those are exactly the kinds of structural details that get murkier, not clearer, when a product’s fund-regulatory status is ambiguous.

The FCA has previously signaled interest in adjacent tokenization questions, including a separate proposal allowing fund managers to tokenize investment funds more broadly — a related but distinct workstream from this gold-specific consultation.

For now, tokenized gold issuers and the banks that might want to use it as collateral are left waiting on a regulatory answer rather than a product limitation — the technology to tokenize gold ownership already exists and is in limited use elsewhere. What’s missing is legal certainty about which rulebook applies, and the FCA’s October 23 feedback deadline is the next concrete marker on the way to getting one.

Regulatory frameworks for tokenized assets remain unsettled across most jurisdictions and can change following consultations like this one; this article is not financial or legal advice. Readers interested in how tokenization of real-world assets works can visit coin680’s Bitcoin Academy.