Can blockchain save London's gold crown?

**Shrehith Karkera** (0:00)
Hello, folks, you're tuned in to Finshots Daily. In today's episode, we explain why London is turning to blockchain technology to protect its centuries-old dominance over the global gold trade.
But before we begin, here's a quick note from Team Ditto. This weekend, we're hosting a free two-day insurance masterclass that helps you build real financial security by understanding health and life insurance the right way. Well, the masterclass is completely free, and you can head to the link in the description to register while your seats last.
Okay, let's start with the story.
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 digitized, and London sits at the center of that system. The city is home to the world's largest over-the-counter gold market. Banks, vaults, refineries, brokers, and clearing institutions are all operating within the same ecosystem. 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 local London trade, 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 a billion at a rapid pace. Financial Conduct Authority, or FCA, is now working on a framework for tokenized gold, where a digital token represents ownership of a specific quantity of physical gold held in a vault. But why does a centralized institution want to put gold on a blockchain? Well, after all, the whole point of a blockchain is to get rid of the institution, right? In order to understand that, let's first look at how London's wholesale gold market currently works. There are essentially two ways institutions can hold gold. Unallocated gold is the first type. 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 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. The next type is 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. 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 recognized share of the underlying physical gold. So an investor could own, say, one person of a bar without having to physically take possession of it, while the gold itself remains safely stored with a custodian. And this is not just a theoretical idea. In September 2025, the World Gold Council and law firm, Linklater, introduced a framework called Pooled Gold Interests or 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. 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 tokenization 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 representing a fraction of a troy ounce of gold. HSBC's work is also being developed within the UK's Digital Security Sandbox, showing that the digitization of London's gold market is no longer just a theoretical idea. And this could give London an important advantage. The city already has vaults, banks, traders, clearing systems, and institutional relationships. Tokenization would allow it to put a digital layer on top of this existing infrastructure. The physical gold would still sit inside vaults, but its ownership could be represented by digital tokens that can be transferred between investors without moving the metal itself. Banks could trade these tokens, investors could divide and transfer their claims more easily, and eventually, institutions could use them as collateral. This could allow London to modernize the way gold is traded without giving up the financial infrastructure that already makes it the world's leading gold market. There is another reason this matters.