FCA Reviews Tokenized Gold’s Role in London’s $1.2 Trillion Market

The Financial Conduct Authority (FCA) is reviewing responses to its call on tokenized gold, a shift that could change how bullion ownership moves through London’s $1.2 trillion vault market.

London vaults held 9,850 metric tons of gold at the end of October. In May 2026, banks handling London gold transactions processed $73.7 billion on an ordinary trading day without moving the bullion itself.

The ledger carries the claim

Most gold in London’s market is held in unallocated accounts. Customers have a general claim to an amount of gold, rather than ownership of particular bars, and are unsecured creditors of their clearing member. Banks can settle trades by updating account records while the metal remains in storage.

Buyers can instead claim specific bars. That gives them ownership of identified bullion, but brings storage costs and makes transfers slower. Unallocated accounts remain attractive because they allow faster trading, even though customers take on the clearing member’s credit risk.

London’s gold market depends on physical custody and checks on gold quality, as well as records of ownership and credit arrangements. Tokens cannot replace vaults, security or checks that the bullion meets required standards. Their potential change is in how ownership is recorded and transferred, and how quickly gold can support a trade.

A token tied to identified bullion could pair a digital ownership record with electronic transfers. Whether it does so depends on the rights attached to the token and how the underlying gold is held. If a token represents only a claim on an issuer, it may not provide the same ownership rights as a token tied to specific bars.

Collateral use depends on speed and rights

Collateral is one possible use for tokenized gold. Institutions facing a collateral call may have little time to provide an asset, while conventional gold transfers can be too slow for that purpose. Faster transfers of clearly defined ownership could make more bullion available for pledging without moving bars between vaults.

The FCA’s call for input, issued Sept. 14 and closed Oct. 23, asked whether tokenization could improve gold trading, transfers, pledging and holding in wholesale markets. The regulator is now reviewing responses. The questions include what ownership rights a token establishes, how the gold is held and whether tokens can be used as collateral.

The circulation of HSBC-issued tokens is a specific test of how far the change could reach. HSBC uses its own system to process transactions. If its gold tokens stay inside that system, tokenization could preserve a bank-centered structure under a digital format. If they can circulate beyond HSBC’s system, ownership could move between institutions without relying on the traditional clearing ledger.

A possible sign of wider token use would be a divergence in market activity: overall gold trading stays strong while transfers through the traditional clearing system decline. That pattern could indicate that some transactions had moved to token-based records, though it would not by itself prove the cause of a decline in clearing activity.

The FCA is reviewing responses to its call as it considers tokenized gold’s role in the wholesale market.