The FCA asks whether a gold token is a fund, and draws the line while asking

What happened

The Financial Conduct Authority published a call for input on tokenised gold on 14 September 2026, asking for responses by 23 October, and published the feedback statement on its wider tokenisation work, FS26/1, on the same day. The gold paper runs to fifteen pages and says it 'follows a broader Call for Input we published in May with the Bank of England on "The future of tokenisation: A joint vision from the authorities for UK wholesale financial markets"', because 'Responses to that paper mentioned gold, given the international strength of the London spot gold trading market'. It sets out the market it is describing: 'The wholesale over-the-counter (OTC) gold market in London is the biggest for spot gold trading in the world', resting on 'trusted vaulting and custody arrangements, well-established market practices, the London Good Delivery framework and deep networks of dealers, clearing members and investors'. It also sets out what is wrong with it. 'Allocated gold gives stronger certainty of ownership because specific assets are recorded by the custodian as owned by the account holder. But it is slower and more costly to mobilise, making it more difficult to be used as collateral. Unallocated gold supports liquidity and simpler account-based transfers. But it represents a claim on an account provider, introducing counterparty exposure', and 'the metal and cash legs of an OTC gold transaction settle through separate systems, creating timing, reconciliation and operational risks'. The paper is explicit about its scope: it 'concerns only those products that: (i) confer ownership rights in the underlying physical gold; and (ii) have transparent and consistently evidenced backing, clearly defined ownership rights and reliable redemption arrangements', and paragraph 2.2 says 'Our objective is not to regulate the segments of the gold trading market that are currently outside of our regulatory perimeter.' It notes that products 'that assert to be tokenised gold products' have grown in market capitalisation and 'driven price discovery on weekends given their extended market hours', and cites the CME's 1-Ounce Gold futures trading 24/7 and Kalshi seeking US approval for perpetual futures tied to gold. Chapter 4 lists five possible responses with the authority that would lead each: a good and poor practice note or clarifying guidance, both FCA-led; 'Developing a recognised "eligible gold token" classification for specified regulatory purposes' and targeted rule or legislative changes, both led with the Treasury; and 'Considering whether a bespoke regime for tokenised gold, or tokenised commodities more broadly, would be necessary and proportionate', which would involve all three authorities. Chapter 5 is the perimeter question. Chapter 6 asks five questions. The companion feedback statement reports 123 responses to the May call for input and says 'Collateral was by far the most frequently mentioned use case', with respondents asking for clarity on the eligibility of tokenised collateral and mentioning tokenized money market funds most often on the buy side; it promises a Tokenisation Roadmap 'later this year'. Neither document has a press release: the FCA news feed carried nothing about either on the day, and the landing page for the gold paper is not in the FCA sitemap and could only be reached through a link on the FS26/1 page.

Why it matters

The reports have this as a regulator considering an exemption, and the more interesting thing is that the regulator has already decided most of it and has published the reasoning. Paragraph 5.11 says a product that directly represents ownership of an allocated bar that can be commercially traded is 'more likely to fall outside the existing CIS and AIF definitions', because each investor would have 'a direct, allocated ownership interest in gold, with no pooling or management of the property as a whole'. Paragraph 5.12 says that if customers hold fractional interests in a single bar and the bar 'is managed or disposed of collectively, this would indicate pooling of the form envisaged in the CIS and AIF definitions'. Those two sentences settle the easy cases in both directions and leave one structure in dispute, which is precisely the one the market wants: paragraph 5.13 records that 'Industry groups have also proposed structures where it is suggested that tokens can represent fractional interests in allocated bars outside the CIS and AIF perimeter', on the argument that 'certain UK legislation outside of financial services allows for transfer of ownership in undivided shares of goods without requiring that the specific share owned by the transferee is identified'. The FCA says it is 'open to hearing further' and then asks the killer question, which is why such an arrangement 'would not still meet all elements of the CIS and AIF definitions'. Tokenizing a bar is only useful if the bar can be split, so the whole commercial proposition rests on the one point the regulator has not conceded. The reason this is worth more than a perimeter argument is what it is for. The paper is about collateral, and the feedback statement says collateral was by far the most frequently mentioned use case across 123 responses. Gold is the classic high-quality asset that nobody can mobilise quickly: allocated gold is safe and slow, unallocated gold is fast and is a credit exposure to your custodian, and in a market where cash and metal settle through different systems the collateral use case dies on the timing. A token over an allocated bar, if it is transferable without being a fund unit, is the first version of gold that is both bankruptcy-remote and same-day movable. That is why paragraph 5.9 matters: 'The prudential treatment of a token and the ability to exchange it as collateral may also vary depending on whether it is classified as gold or a fund unit.' A fund unit and a commodity attract different capital treatment and different eligibility, so the perimeter question is a capital question wearing a definitional costume. The third thing is the price of an exemption. The FCA does not offer one for free: any wider carve-out 'would need to be limited to products that were more appropriately regulated under a different regime providing more effective protections', and it lists twelve conditions such a regime would have to address, from the legal nature of holders' interests through vaulting and segregation, reconciliation between physical and onchain records, independent audit of custody records, benchmark and valuation methodology, wind-down and insolvency, to 'Dealing arrangements, including where the issuer or an affiliate is the sole liquidity provider'. Read as a list, that is a description of most existing tokenized gold products and what is missing from them. And the last line of chapter 5 is a reminder that leaving one perimeter does not mean leaving all of them: paragraph 5.17 says firms would still need to consider whether the token is a 'qualifying cryptoasset' under article 88F of the Regulated Activities Order.

What is not settled

Nothing is decided. The paper says its five options 'are not firm proposals and may be used individually or in combination', three of the five need the Treasury and one needs all three authorities, and no timetable is given beyond the 23 October deadline and a Roadmap promised for later in the year. Whether the co-ownership structure of paragraph 5.13 survives is the commercial question and the FCA has asked the industry to argue it rather than ruling. The legislation the industry relies on is not named in the paper, so the argument cannot be assessed from the document alone. What an exemption would mean for retail is unresolved in a way the paper half-acknowledges: a UCITS scheme 'cannot be dedicated to gold' and a gold CIS 'may constitute an unregulated CIS, limiting the ability to market the product to consumers or certain classes of investor', so taking a product out of the fund perimeter does not automatically make it distributable, and the FCA says any exemption must avoid 'conferring credibility on poorly designed products'. Nothing is said about how this interacts with the Bank of England's prudential work beyond a promise to coordinate, and the paper does not state whether an eligible gold token would be acceptable collateral at the Bank. On sourcing, two things should be recorded. The FCA published no press release for either document and the publications search on its own site renders client-side and returns 403 to a fetch, so the gold paper was reached through the PDF address and its landing page found only through a link on the FS26/1 page; both PDFs and both landing pages were then read in full. And the trade press has read the paper through a Financial Times report rather than from the document, which is visible in the framing: the reports lead on an exemption the FCA lists fifth of five and describes as conditional on the Treasury.