Can blockchain save London's gold trade?

In today’s Finshots, we explain why London is turning to blockchain technology to protect its centuries-old dominance over the global gold trade.<br>But here's a quick sidenote before we begin. Insurance got cheaper a while back - but cheaper doesn't mean sorted.<br>Since the government removed the 18% GST on premiums, this is genuinely the best time to buy. But which policy? How much cover? What to avoid?<br>That's exactly what we'll cover in our 2-day Insurance Masterclass.

📅 Tomorrow, 13th August at 6:30 PM: Life Insurance<br>📅 Friday, 14th August at 6:30 PM: Health Insurance

Only 300 seats remaining. 👉 Click here to save your spot.<br>The Story<br>For centuries, gold has been a physical asset. If you wanted to own it, you needed the actual metal, or at least a trusted institution that held it for you. But over the years, the business of trading gold has become increasingly digitised. And London sits at the centre of that system.<br>The city is home to the world's largest over-the-counter gold market, with banks, vaults, refiners, brokers and clearing institutions all operating within the same ecosystem.<br>So even if a South African mine is selling to a bank in Australia, the transaction involving that bar will most likely pass through London's financial infrastructure. This is called a Loco London trade.<br>But that system is now facing a new challenge. Gold demand is shifting towards Asia, with China and India among the world's biggest consumers and central banks accumulating bullion at a rapid pace.<br>So, in order to protect London’s role in the gold ecosystem, the UK's Financial Conduct Authority (FCA) is now working on a framework for ‘tokenised’ gold, where a digital token represents ownership of a specific quantity of physical gold held in a vault.<br>But why does a centralised institution want to put gold on a blockchain? After all, the whole point of a blockchain is to get rid of the ‘institution’, right?<br>Sidebar: If you're interested in knowing more about blockchain and cryptocurrencies, we've written an entire series on how it works. Check it out here: Finshots Cracks Crypto.<br>In order to understand that, let’s first look at how London's wholesale gold market currently works.<br>There are essentially two ways institutions can hold gold:<br>Unallocated gold: Most wholesale gold today is held through unallocated accounts. Think of this as a bank account denominated in ounces of gold. If you have 100 ounces in your account, you do not own 100 specific ounces sitting somewhere in a vault. Instead, you have a general credit claim against the bullion bank or clearing bank for 100 ounces of gold. This makes unallocated gold extremely convenient because you can buy and sell large quantities without identifying, moving or storing specific bars. But there is a trade-off. You are an unsecured creditor of the institution. If the bullion bank runs into financial trouble, your claim is exposed to its credit risk because the bank is not holding specific gold on your behalf.<br>Allocated gold: This is the opposite. Here, specific, numbered bars are assigned directly to the owner and recorded as their property. The custodian's role is simply to store and safeguard those bars on the owner's behalf. This gives the investor a much better property right and largely separates their ownership of the gold from the custodian's financial health. But that protection comes with higher costs and less flexibility. Each bar has to be identified, stored, insured and managed, and you cannot easily divide or transfer a specific physical bar without going through additional processes.<br>This creates an interesting opportunity. Imagine a gold bar sitting safely inside a vault, but instead of one institution owning the entire bar, the ownership of that bar is divided into hundreds of digital tokens. Each token could represent a legally recognised share of the underlying physical gold. So an investor could own, say, 1% of a bar without having to physically take possession of it, while the gold itself remains safely stored with a custodian.<br>And this is not just a theoretical idea. In September 2025, the World Gold Council and law firm Linklaters introduced a framework called Pooled Gold Interests (PGI), which allows wholesale investors to hold beneficial ownership in pools of physical gold rather than relying only on a general credit claim against a bullion bank. In other words, it is designed to bridge the gap between allocated and unallocated gold, giving investors an interest in physical bullion while making those interests easier to divide and transfer.<br>The technology is already being tested in London's gold market too. HSBC, one of the world's largest precious-metals custodians, launched a live gold tokenisation platform in 2023. It creates digital representations, or "digital twins", of physical gold held in its London vaults. Institutional clients can trade these tokens through HSBC's Evolve platform, with each token...