World Gold Council Proposes Tokenized Gold Framework to Unlock Collateral Use

The World Gold Council has unveiled a proposed legal and operational standard for ‘tokenized’ gold ownership that aims to fix a long-standing weakness in the bullion market: traders must typically choose between the safety of title to specific bars and the liquidity of a credit-based claim. Developed with global law firm Linklaters, the framework introduces a new ownership construct designed to make gold usable as high-grade collateral without forcing bars to move between vaults.

The proposal, published as a white paper, centers on a concept called ‘Pooled Gold Interests’ (PGI). Rather than issuing another retail-facing crypto token, PGI is positioned as a wholesale market solution—built to fit the mechanics of the London OTC market and to meet regulatory expectations around margin and collateral in the UK, EU, and the U.S.

To understand why the World Gold Council is targeting settlement rather than simply digitizing access, it helps to look at how bullion typically changes hands in the OTC market. The first model, ‘allocated’ gold, gives the owner direct title to specific bars held in a vault, identified by serial number, weight, and purity. This structure offers strong protection if a custodian fails, but it is operationally rigid: it trades in large bar sizes (often around 400 ounces) and is cumbersome to use as collateral because market practice often requires moving the bars into a counterparty-controlled facility.

The second model, ‘unallocated’ gold, is far more liquid and divisible—often traded to three decimal places—making it the dominant format for ‘loco London’ trading. But unallocated positions are essentially contractual claims on the custodian. In an insolvency, holders can be exposed like unsecured creditors, which is one reason unallocated gold typically fails to qualify as eligible ‘financial collateral’ under regulatory regimes such as the EU and UK’s EMIR framework for OTC derivatives.

The white paper argues this creates an ‘opportunity gap’: the market lacks a settlement and ownership method that combines allocated gold’s legal security with unallocated gold’s divisibility and transferability. PGI is presented as the missing middle layer.

Under the PGI model, a small number of ‘core participants’ would hold legal co-ownership of a pool of physical bars stored in a vault. Each participant could issue transferable PGI units representing fractional ownership interests in that pool, allowing positions to be held and transferred in small increments—down to one-thousandth of an ounce—while maintaining a legal link to segregated physical metal. The co-ownership structure is anchored in UK law, including provisions in the Sale of Goods Act that allow for undivided shares in identified goods.

Linklaters’ legal analysis describes PGI as an intangible property right—classified as a ‘thing in action’ rather than a possessory interest. That distinction matters because it is intended to make collateralization operationally simpler: a security interest can be granted over the interest without the same physical delivery and segregation steps that often complicate allocated gold collateral in practice.

Collateral utility is the central commercial motivation. Gold is widely viewed as a deep, resilient market with safe-haven characteristics, yet it plays a limited role in modern margining because the prevailing market formats are ill-suited to regulatory and clearing workflows. In the allocated world, the need to transfer bars to a clearing house-approved vault can be a bottleneck. In the unallocated world, the credit-risk profile can prevent recognition as eligible collateral. The World Gold Council’s proposal suggests PGI could be posted as initial margin or default fund contributions at central counterparties (CCPs), or used to satisfy bilateral margin requirements for uncleared derivatives—without moving bars.

Still, the paper acknowledges that regulatory definitions remain a key hurdle. In the UK, the Financial Collateral Arrangements (No. 2) Regulations (FCARs) constrain what counts as ‘financial collateral’ largely to cash, financial instruments, and credit claims—leaving gold outside the standard perimeter. The World Gold Council said it is engaging with regulators on potential changes that could broaden the definition to include gold, aligning with broader efforts to improve gold’s standing within bank capital and liquidity frameworks, including campaigns tied to ‘high-quality liquid asset’ treatment.

On the technology front, the framework is explicitly ‘technology-neutral.’ Rather than mandating blockchain or a specific distributed ledger technology (DLT), it proposes a phased approach—starting with existing U.S. dollar payment rails and integrating DLT-based settlement as the ecosystem matures. The stated goal is adoption without forcing institutions to overhaul familiar infrastructure, while leaving the door open to future enhancements such as smart contracts and DLT-enabled delivery-versus-payment (DvP) mechanics.

This institutional emphasis differentiates PGI from crypto-native tokenized gold products such as Tether Gold and Pax Gold, which primarily target retail accessibility and on-chain liquidity. PGI, by contrast, is designed around wholesale market requirements: legal title structure, integration with established bullion settlement conventions, and compliance-driven collateral eligibility. Market data points to rising interest in tokenized commodities—RWA.xyz estimates the tokenized commodities segment at roughly $5.5 billion, about 20% of the tokenized real-world asset market, after significant year-on-year growth—but most of that activity remains consumer-oriented rather than focused on the much larger institutional collateral universe.

The proposal also flags practical execution risks beyond law and regulation. A co-ownership system among core participants would require detailed operational rules, governance standards, and dispute-resolution mechanisms, as well as enough early participants to generate liquidity. Cross-border alignment will matter as well, given that bullion trading and derivatives margining span multiple jurisdictions. The white paper notes that the structure is designed not to constitute a ‘collective investment scheme,’ a classification that would trigger additional regulatory burdens, and says that point has been assessed in the legal review.

For the gold market, the initiative signals a more ambitious interpretation of ‘tokenization’—not simply putting gold on a blockchain, but rebuilding ownership and settlement so the metal can function more like modern financial collateral. While the framework remains at the design stage and could take time to reach regulatory acceptance and meaningful market adoption, the World Gold Council and Linklaters have laid out a detailed roadmap that, if implemented, could reshape how gold is held, transferred, and used across institutional finance.