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UK gold tokens: clever idea or Hail Mary? Plus hard data on illiquid token markets & the SEC's 5-year window: The Intersection (#30)

UK gold tokens: clever idea or Hail Mary? Plus hard data on illiquid token markets & the SEC's 5-year window: The Intersection (#30)
Photo by Zlaťáky.cz / Unsplash

Welcome to another weekly letter (#30) from TheIntersection team.

In this issue:

  1. News: SEC gives tokenised stocks a five-year regulatory window
  2. Data: The Real State of Tokenization in 2026
  3. Analysis: UK gold market faces ‘existential’ threat
  4. Our weekly events round-up

Before we dive in, one request: please forward this weekly letter to anyone you think might be interested. We also very much welcome feedback (and contributors). If you want to email us, just drop an email to us at teams@theintersection.news

News in Brief

SEC gives tokenised stocks a five-year regulatory window. The SEC has introduced a five-year conditional exemption allowing certain on-chain venues to trade tokenised U.S. stocks without registering as traditional exchanges. The rules require tokenised stocks to provide the same rights as the underlying securities, including dividends and voting rights, and give issuers the opportunity to object. Why it matters: The move gives tokenised-equity platforms a clearer route into the U.S. market, while making issuer consent and shareholder rights central to how these products operate.

Circle’s Arc mainnet goes live. Circle has launched Arc, its institutional Layer 1 built around USDC, with a founding group that includes BlackRock, DTCC, Visa, Mastercard, ICE and Standard Chartered. BlackRock is expected to bring its BUIDL fund onto the network, while DTCC plans to connect its own tokenisation work to Arc. Why it matters: Arc is an interesting example of traditional financial institutions becoming part of the infrastructure securing public blockchain networks, rather than simply using them.

Robinhood Chain fees fall 97% as activity stays high. Robinhood Chain’s daily fees have fallen from around $8 million to $230,000, a 97% drop, while transaction activity has remained relatively strong. Data reported by CoinDesk shows the network was still processing around 8.9 million transactions on September 16, with roughly $1.5 billion changing hands each day. Why it matters: The numbers show how quickly blockchain economics can shift when speculative activity cools, even when underlying network conditions remain strong.

CFTC pushes ahead with its own crypto rules. With the CLARITY Act stalled in Congress, the CFTC has sent its own crypto market rulemaking to the White House for review. Details of the proposal have not yet been made public, but the move shows U.S. regulators continuing to develop crypto rules through their existing powers rather than waiting for new legislation.

The Real State of Tokenization in 2026
Although the amount of onchain assets has undoubtedly increased, the recent Real State of Tokenization 2026 report found that very little is actively moving. That raises an interesting question about what happens when billions of dollars of tokenized assets exist without necessarily having deep secondary markets or consistent trading activity.

Real institutions have undoubtedly shown up in the markets for tokens: BlackRock, JPMorgan, Franklin Templeton, Fidelity and WisdomTree all run live products, and the SEC, Nasdaq and the NYSE have all made big moves on tokenized securities this year.

But the report from Be(in) Intelligence suggests that most of the market hasn't got past the build-out phase. The report points out that just 62 assets, out of more than 7,000 tracked, hold 88% of the value, and much of that concentration sits in a single issuer's book: Figure's HELOC token alone is $18.3 billion, recorded on a platform called Provenance but structurally unable to leave the platform. Only Treasuries clear that bar convincingly, with 99% of value freely transferable and a genuinely broad, c.62,600-strong holder base.

Regulatory fragmentation locks out 97% of US retail capital, and over a third of the market sits in an unclassified regulatory limbo. Meanwhile, more than half the market shows no weekly transfer activity at all, though the report is careful to note that a chunk of that dormancy is by design (Represented assets, by definition, don't move on public rails) rather than a sign of failed adoption.

The core issue is in what is, in effect, an infrastructure gap: no compliance bridges between regulatory regimes, no distribution rails wide enough to move products beyond a narrow accredited-investor pool, and no settlement layer connecting the "Represented" and "Distributed" halves of the market.

Key data points from the report:

UK gold market faces ‘existential’ threat

 by Damien Black

The Financial Conduct Authority (FCA) has announced that it will greenlight tokenized gold. Some interpreted this as a move by the UK to help it maintain its top spot as a gold hub amid competition from the US and China. But is this really about the yellow metal – or keeping up with tokenization?

 The Financial Times recently described the FCA’s regulatory announcement as “preparing a framework for tokenized gold as part of plans to encourage the digitisation of financial markets and to protect the dominance of London in global bullion trading”. Reacting to the news, CoinGeek said the move was in response to “London’s dominance of the gold market [...] being challenged by the United States and, in particular, by China”.  The World Gold Council estimates that the UK currently holds about 70% of the world’s over-the-counter (OTC) gold trading and the FT agrees that China poses a threat to this eminent position (although unlike CoinGeek it did not mention the US). However, according to experts interviewed by the Intersection, it is digital infrastructure and not gold that the UK should really be worried about.

 This isn’t just about China

 “I don’t think this is just the UK’s fear of waking up to a China-dominated world,” Amram Adar of crypto firm Oobit told the Intersection. While acknowledging London remains the global hub for gold, he added: “Tokenization creates an anomaly for dominance – you can dominate the physical gold market, but competitors or market players may dominate the infrastructure built around the digital market for that gold.”

 Regulated gold tokens in the UK might help it compete with China, but if the global infrastructure for gold trading radically shifts London could suddenly find its yellow-metal privileges revoked, Adar suggests. And the FCA’s shiny new regulations might not do much about that. “The new gold trade facilitation with custody and settlement could extend outside London,” he said. “When liquidity and infrastructure move, you cannot bring them back solely with regulation.”   Worse yet, warns Adar, the FCA regulations could essentially backfire to the UK’s detriment. “Tokenized gold will also raise legal questions surrounding the ownership of bullion‚ verification of bullion reserve‚ entitlement to redemption of tokenized gold‚ custody of bullion‚ insolvency‚ and interoperability of gold-tokenization platforms,” he said․ “If these legal uncertainties are not adequately addressed‚ the UK could end up with a rigorously regulated market that is completely unused․ Regulation could only work if there was a sufficient balance of certainty and competition for share in the international market.”

 Existential threat to UK gold dominance

 Vanessa Grellet, managing partner of Arche Capital and author of the upcoming book Digital Assets and Crypto For Investors, sounds an even starker warning about what could happen if the infrastructure for gold trading bypasses the UK. “The real threat isn’t that China will replace London as the settlement hub tomorrow,” she told the Intersection. “It’s that tokenization creates a new layer of the gold market – digital ownership, programmable collateral, on-chain settlement – that could be captured by a competing jurisdiction without London needing to lose a single bar of physical gold.” What this means is that if tokenized gold issuers were to domicile in, say, Singapore or Hong Kong, with smart contract standards set by the Shanghai Gold Exchange and liquidity pools formed on Asian-regulated venues, “London keeps the metal but loses the financial architecture on top of it.”

 Grellet concluded: “That’s the existential risk, and it’s much harder to reverse than losing OTC flow. Yes, China is a driver – not because Beijing is stealing physical volume, but because the competitive battleground has moved from vault capacity to digital infrastructure, and China (via Hong Kong) is building that infrastructure faster.”

  UK lagging behind US

 What about the US – if the game is about infrastructure and regulation, presumably the UK has as much reason to fear its transatlantic cousin as China? Grellet herself acknowledges that the FCA “has absolutely been slow” to step into the tokenization pool – in sharp contrast to the US, which has been on point with the GENIUS and CLARITY acts. The FCA has upped its game somewhat. Average crypto-asset registration approvals in the UK took 511 days to clear in 2023, and between 2021 and 2024 applications had fallen 51%, with 186 despairing firms withdrawing their applications entirely. By last year it had brought the waiting time down to around five months, but this may be a case of too little too late: in Grellet’s words, Gemini “straight-up exited the UK” this year, citing overlapping regimes and high compliance costs.

 A far cry indeed from Donald Trump’s crypto-savage America. “Under the Trump administration, the US has moved aggressively,” said Grellet, pointing to the GENIUS Act’s creation of a federal stablecoin regime backed 100% by reserves. Add to that this year’s presidential Executive Order directing the Federal Reserve to assess non-bank crypto access to payment accounts, and the joint “landmark clarification” by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), which drew clean lines between securities and commodities.

 As a result, Grellet says, Andreessen Horowitz’s venture capital firm a16z closed its London office to focus on the US, while Gemini, as already noted, exited the UK entirely. “Grant Thornton's analysis explicitly warns of a brain drain from London to New York,” she added. “The US-UK Transatlantic Taskforce’s 10-point roadmap (July 2026) is itself an admission that the UK needs coordination with the US — not the other way around.”

 UK losing regulatory advantage

 The problem facing the UK is that it is steadily losing what was historically always a key advantage: regulatory predictability and rule-of-law certainty. The US now offers this certainty in the form of pro-crypto legislation – on top of which it benefits from the sheer size of its market. Of course, the UK can’t match the latter, “so it has to win on regulatory quality,” said Grellet, “and it’s been losing that argument.” As such, the FCA’s sudden enthusiasm for gold tokens can be viewed almost as a “defensive move in a two-front war”. “China competes on infrastructure and physical flow,” said Grellet, “the US competes on capital, talent, and regulatory clarity. London needs to hold its position on both fronts, and tokenized gold is the asset class where it has the strongest natural advantage to defend.”

 To put that advantage in figures, London’s gold market still dwarfs Shanghai’s – with 9,534 tons of gold worth an estimated $1.2 trillion sitting in London vaults, more than ten times what its Chinese rival holds. As Grellet puts it, “London isn’t about to be displaced overnight” in the gold bullion stakes. But that’s precisely why it needs to act fast if it doesn’t want to see that advantage negated or even become irrelevant.  “Gold is different from general crypto,” Grellet said. “The FCA can afford to be slow on DeFi, meme-coins, and retail crypto trading – the political and economic cost of delay there is diffuse. Tokenized gold hits London’s crown jewel.” The World Gold Council estimates that London’s OTC gold market clears $180 billion daily, and recent price surges have pushed this figure as high as $216 billion in 2026. “When the regulator perceives an existential threat to a national strategic asset, the gears move much faster,” said Grellet.

 FCA to the rescue – really?

 … except, the FCA is not noted for its swiftness. CoinDesk reported in May 2026 that “nagging bureaucratic barriers and legislative friction behind closed doors are severely delaying” its unified crypto framework. Even allowing for Grellet’s existential impetus, can the notoriously slow UK regulator really be relied upon to deliver the goods at speed?

 The FCA’s call for input closed on July 3 with a response statement expected “later” in the year after “workshops with industry over the coming months”. This is simply not good enough, says Grellet. “That’s just for feedback review,” she said. “Final rules are likely 12-18 months out, which in crypto terms is an eternity. International firms are voting with their feet now, not waiting for UK rules to land.”  That said, there is parliamentary pressure – in September this year the House of Lords voted in favour of requiring the Treasury to publish a national digital asset strategy within 12 months. “The FCA will deliver something on tokenized gold, because the Bank of England and Treasury are aligned and the economic stakes are clear,” said Grellet, but warned that “something” might prove to be a let-down – “a 2027 timeline for wholesale collateral rules and 2028 for anything touching retail is realistic”. She added: “The risk is that by then, the infrastructure battle has already been lost to Hong Kong or Singapore.”

 Even if the FCA does get the job done in time, it will also be constrained by a regulatory paradox – it doesn’t actually regulate the underlying asset. This is because physical gold trading in the UK is largely unregulated or “self-regulated” as Grellet puts it – things like vaulting, security and transport fall under the purview of entities such as the London Bullion Market Association (LBMA), which sets standards but is not a regulator per se. “Tokenized gold – a digital representation of that same physical metal – would fall inside the FCA’s perimeter,” said Grellet. “You end up with a situation where the underlying asset is unregulated but the digital wrapper is regulated, creating weird arbitrage and legal uncertainty. If a token represents a gold bar that the LBMA clears but the FCA regulates the token, who has jurisdiction in a dispute?”

 Regulations could kill competition

 Grellet also echoed Adar’s concerns that well-intentioned regulation by the FCA could backfire if compliance costs end up forcing out would-be competitors – and given that 96% of tokenized gold reserves are controlled by the duopoly of Tether Gold (XAUT) and PAX Gold (PAXG), they are badly needed. “A well-intentioned UK regulatory framework could accidentally entrench this duopoly by setting compliance costs so high that only the two incumbents can afford to operate in the UK market – ironically locking out the innovation the FCA claims to want,” said Grellet. This might leave London-based HSBC’s Orion platform as the only UK-regulated alternative, in effect trading “a duopoly for a quasi-monopoly”. She also points out that, unlike Tether and PAX, the HSBC gold platform operates only in a permissioned, closed environment.

 Whatever the outcome for the FCA’s gold regulation project, Grellet believes the UK already lags too far behind other jurisdictions to avoid the inevitable game of playing catch-up. “The FCA’s finished framework may be sensible, but the world moves fast and won’t wait while the UK sequences reforms across three consultations and a two-year runway,” she said. “The EU already has [crypto-asset regulation] MiCA. Singapore has Project Guardian and a clear tokenization sandbox. Hong Kong has live tokenized gold products. The UK is trying to build the regulatory architecture after the building has been occupied.”

 Events on our radar

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