Market regulators in the United Kingdom are developing rules that will allow investors to trade tokenized gold products.
The U.K.’s financial watchdog is preparing new rules for tokenized gold as part of its digital asset strategy.
The Financial Conduct Authority (FCA) says it wants to ensure that London maintains its status as the top global hub for the trade of gold and other metals in a digital age.
Tokenization is the creation of digital tokens on a blockchain that track the price performance of real-world assets such as stocks, bonds, or, in this case, gold bullion.
Tokenized assets allow investors to trade fractional parts of traditional equities using cryptocurrency infrastructure.
London, England has historically been the top centre in the world for gold trading and currently accounts for 70% of the world’s trading volumes in metals, according to the World Gold Council.
The Financial Conduct Authority says it wants to clarify the rules around tokenized gold products to ensure they represent ownership rights in physical gold.
Under the regulations being developed, the issuer of tokenized gold would be required to hold physical gold to support and back digital versions of the metal.
The regulator is seeking feedback from the public on the role tokenized gold could play in financial markets and is expected to announce new rules for the tokenized metal by year’s end.
Gold is trading at $4,391 U.S. per ounce on Aug. 10.
