As gold goes digital, Hong Kong vies for London’s crown

(By Caixin journalists Wang Shiyu, Yue Yue, Liu Ran and Zhu Liangtao)

In the dead of night, a fleet of armoured trucks operated by leading security logistics firms slips quietly out of a secret underground vault in central London. Escorted by police, the convoy heads for Heathrow Airport.

Inside the reinforced vehicles are standard 400-troy-ounce gold bars, each stamped with a unique serial number and worth about US$1 million. Strapped to pallets, the bars are moved in tightly controlled loads: one pallet holds a ton of gold, worth roughly US$100 million.

For decades, this cumbersome logistical ballet has underpinned the global gold trade and reinforced London’s position as the world’s leading physical gold depository. As of July 2026, the city’s vault network held about 9,534 tons of gold, or roughly 763,000 bars worth US$1.2 trillion.

Less than 4% of that bullion belongs to the Bank of England. Instead, London’s network of vaults functions as a kind of public warehouse for the global market, safeguarding the reserves of foreign central banks as well as assets owned by commercial banks, financial institutions and private clients.

That dominance, however, is facing new pressure. Geopolitical tensions are prompting some central banks to repatriate reserves or diversify overseas custody arrangements, according to a 2026 survey by the World Gold Council (WGC).

At the same time, the centuries-old physical gold market is being reshaped by digitisation. Blockchain technology is giving rise to tokenised gold — digital claims on physical bullion that can be transferred, divided and pledged as collateral around the clock across borders. As that market develops, regional hubs, most notably Hong Kong, are expanding both physical storage and digital infrastructure in an effort to capture a larger share of the trade.

From bullion to blockchain

The appeal of gold tokenisation is rooted in the metal’s enduring role as a store of value. Amid persistent market concern over risks tied to US Treasuries, gold has further strengthened its position as an alternative reserve asset.

In late August 2026, spot gold prices climbed back to a record US$2,600 an ounce after months of volatility, pushing the value of global gold reserves toward US$4 trillion.

Yet physical gold remains difficult to transport and deploy, limiting its usefulness in modern financial transactions such as collateralised financing. Tokenisation is seen as a potential remedy and has emerged as an important segment of the broader push to tokenise real-world assets.

Growth has been rapid. According to blockchain analytics platform CoinGecko, tokenised commodities reached US$5.5 billion by the end of the first quarter of 2026, with gold accounting for 95% of the total. Spot trading in tokenised gold reached US$90.7 billion in the quarter alone, exceeding the US$84.6 billion recorded in all of 2025.

The market is moving away from a system constrained by fixed bar sizes and specifications toward one in which “gold is simply gold”, Terry Heymann, chief strategy officer at the WGC, told Caixin in late August. Digital formats allow investors to hold more precise amounts of gold and simplify conversion, he said.

Hong Kong makes its move

As London adapts to changing global demand, Asian financial centres are moving quickly. Hong Kong, in particular, is seeking to build a broader gold ecosystem spanning storage, refining, trading and digital investment products.

Physical custody remains the foundation of tokenised gold, and Hong Kong is moving to expand capacity. After a 2024 proposal to increase precious metals vault capacity at Hong Kong airport from 200 tons to 1,000 tons, Chief Executive John Lee set a more ambitious goal in his September 2025 policy address: lifting the city’s gold storage capacity to more than 2,000 tons within three years.

International banks are paying attention. In June 2026, Standard Chartered PLC said it was studying the feasibility of establishing its own gold vault in Hong Kong.

The city is also deepening links with the Chinese mainland’s gold market. The Shanghai Gold Exchange opened a designated warehouse in Hong Kong in June 2025. A year later, Hong Kong launched a trial of its own Gold Central Clearing System and a Delivery Connect mechanism, effectively linking the physical gold liquidity pools of the two markets.

Even so, the rollout has been cautious. HSBC launched a retail-focused Gold Token on a private blockchain in early 2024, followed by the Hang Seng Gold ETF token in April 2026. In May, Yunfeng Financial Group Ltd. introduced a tokenised gold product backed by London Bullion Market Association-standard gold stored in Hong Kong. The product is limited to professional investors — individuals with portfolios of at least HK$8 million (US$1 million), or institutions with at least HK$40 million.

That high threshold reflects Hong Kong’s deliberate but prudent approach to digital asset development, according to an industry source.

Breaking down the silos

Despite fast growth, the tokenised gold market remains fragmented. Public chain products such as Tether Gold and PAX Gold together account for more than 90% of the commodity real-world-asset market. Commercial banks are also testing private chain offerings, including DBS Bank Ltd.’s planned retail gold token in Singapore.

But those products largely remain siloed. An investor cannot freely use a token issued on a public blockchain within a bank’s proprietary system, constraining liquidity and market depth.

To address that problem, the WGC has proposed infrastructure concepts such as “Pooled Gold Interest” and “Gold as a Service”. The goal is to standardise custody, compliance and settlement processes and build a more interoperable digital ecosystem for gold products.

Creating such infrastructure is likely to take years. But Heymann said commercial banks support the effort because they see interoperability as essential to expanding demand. Without it, he said, the market’s growth potential will remain artificially constrained.

Trust remains the missing piece

For tokenised gold to win broader institutional adoption, the industry still needs to overcome a persistent trust gap.

David Tait, chief executive of the WGC, said many investors remain reluctant to shift assets from highly regulated traditional gold ETFs into digital tokens, which are still often associated with the volatility of the broader crypto sector. The core concern is custodial risk: whether a token can be reliably verified as being backed by an LBMA-certified gold bar held in an audited vault.

Regulatory uncertainty has compounded those concerns. In the US, questions remain over whether gold tokens should fall under the jurisdiction of the Securities and Exchange Commission as securities or the Commodity Futures Trading Commission as commodities. In Europe, they remain in a grey area under the Markets in Crypto-Assets framework.

Regulators are beginning to respond. In May, the UK’s Financial Conduct Authority and the Bank of England said they were assessing whether tokenised gold could be used as collateral in uncleared over-the-counter derivatives transactions. For that to happen, regulators and clearing houses will require legal certainty over ownership rights and confidence that the underlying gold can be liquidated quickly in the event of default.

The Bank of England, which holds roughly 400,000 gold bars in its underground vaults, is also upgrading its collateral management systems to connect directly with digital asset ledgers.

By 2028, the central bank plans to launch a Synchronisation Service designed to ensure that transfers of tokenised assets occur simultaneously with the corresponding fiat payment. If successful, the move could eliminate settlement risk and help bring one of the world’s oldest markets more fully into the digital era.

This article was first published by Caixin Global as “In Depth: As Gold Goes Digital, Hong Kong Vies for London’s Crown”. Caixin Global is one of the most respected sources for macroeconomic, financial and business news and information about China.

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