FCA Seeks Input on Tokenized Gold Opportunities, Risks, and CIS/AIF Perimeter for UK Wholesale Marke

Key Takeaways

• The FCA has issued a Call for Input, open until October 23, 2026, on whether tokenizing physical gold could improve trading, collateral mobilization, and settlement in UK wholesale markets.
• It also asks whether uncertainty over the collective investment scheme (CIS) and alternative investment fund (AIF) perimeter is holding back product development.
• Compliance teams should treat this as an early signal of policy direction and consider responding, because outcomes could include guidance, an "eligible gold token" classification, targeted exemptions, or a bespoke regime.

Deep Dive

The FCA has issued a Call for Input, open until October 23, 2026, on whether tokenizing physical gold could improve trading, collateral mobilization, and settlement in UK wholesale markets. It also asks whether uncertainty over the collective investment scheme (CIS) and alternative investment fund (AIF) perimeter is holding back product development. Compliance teams should treat this as an early signal of policy direction and consider responding, because outcomes could include guidance, an "eligible gold token" classification, targeted exemptions, or a bespoke regime.

It follows the May joint FCA/Bank of England paper on the future of tokenization in UK wholesale markets. The scope is limited to products that confer ownership rights in underlying physical gold and have transparent, consistently evidenced backing, clearly defined ownership rights, and reliable redemption arrangements. The FCA says it does not intend to regulate segments of the gold market currently outside its perimeter, and it emphasizes anti-money laundering protections and market integrity.

The paper identifies several areas of focus. For wholesale use, it covers tokenized gold as collateral in securities lending, repurchase agreements, and derivatives, and delivery versus payment (for example, gold tokens against USD tokens). Open legal questions include the enforceability of token-holder rights, insolvency treatment, a secured party's ability to control and realize collateral, settlement finality for on-chain transfers, reconciliation of on-chain and vault records, and prudential treatment. The FCA expects market-led interoperability standards covering ownership records, issuance and redemption, segregation and safeguarding, audit and attestation, and cyber security and operational resilience. For consumer-facing products, it expects minimum disclosures on safekeeping and insurance, redemption, regulatory status, fees and minimum thresholds, and outcomes if an issuer, custodian, vault, technology provider, or intermediary fails.

The CIS/AIF perimeter is the most legally significant section. A gold token is a CIS if it meets the statutory limbs. A UCITS scheme cannot be dedicated to gold, so an unregulated CIS dedicated to gold may face marketing restrictions. Products giving each investor direct allocated ownership with no pooling are more likely to fall outside the perimeter. Fractional interests in a single bar that is managed or disposed of collectively point toward pooling and a CIS/AIF. The FCA is also open to industry arguments that co-ownership of undivided shares falls outside the perimeter, but wants to hear why such structures would not still meet every element of the definitions. Possible responses range from guidance and good and poor practice notes to an "eligible gold token" classification (HMT and FCA), targeted rule or legislative changes, a CIS/AIF exemption, or a bespoke regime for tokenized gold or commodities (all three authorities). Any wider exemption would be limited to products regulated under an alternative regime that addresses 12 listed areas, including custody, audit, governance, benchmarks, dealing arrangements, financial crime controls, disclosure, and wind-down. Firms must also consider whether the "qualifying cryptoasset" definition (article 88F of the Regulated Activities Order) applies. The FCA's July 2026 AIFM consultation and the parallel Treasury consultation on the AIF definition are relevant context.

Key deadline: responses are due by October 23, 2026, to tokenisedsecurities@fca.org.uk. Responses may be disclosable under the Freedom of Information Act 2000, so confidential material should be clearly marked.

Recommended actions:
- Inventory any current or planned exposure to tokenized gold, whether as issuer, distributor, custodian, collateral taker, or trading counterparty.
- Have legal teams assess product structures against the CIS and AIF definitions, and the qualifying cryptoasset definition.
- Review collateral eligibility, prudential, and insolvency treatment assumptions.
- Test AML, custody, reconciliation, and disclosure controls against the FCA's 12-point list.
- Decide whether to respond directly or through trade associations, and monitor the AIFM and Treasury consultations.

Risk impact: the near-term obligation is low, since no new rules are proposed. Strategic and regulatory-classification risk is meaningful, because a CIS/AIF classification could trigger authorization, distribution, disclosure, and supervisory requirements. Retail distribution of poorly disclosed or inconsistently regulated tokens is a clear consumer protection concern, and the FCA signals it will avoid conferring credibility on poorly designed products.

Source: Financial Conduct Authority