by Xinhua writer Gao Wencheng
LONDON, Sept. 6 (Xinhua) -- The World Gold Council (WGC) has recently announced plans to pilot Pooled Gold Interests (PGI) in London from early 2026, a scheme that would allow fractionalized ownership and real-time settlement of gold, pushing one of the world's oldest safe-haven assets further into the digital age.
This is the latest step in the WGC's multi-year effort to digitize the gold market.
Backed by financial technologies and physical vaulting, the initiative aims to modernize London's 900 billion-U.S.-dollar bullion trade. Yet its success will depend on overcoming entrenched resistance from market incumbents and navigating a patchwork of regulatory approaches.
WHAT IS DIGITAL GOLD?
London's gold market today operates under two main structures: "allocated" gold, which involves ownership of specific bars but is costly and complex, and "unallocated" gold, which offers greater liquidity but carries counterparty risk. The WGC's proposal would create a third category for over-the-counter (OTC) gold trading, according to a white paper published on Wednesday jointly with law firm Linklaters.
Under the PGI model, banks and investors would be able to buy and sell fractionalized ownership of physical gold held in segregated accounts, co-owned by core participants through a trust structure. The pilot will be launched with commercial institutions in London in early 2026, the Financial Times (FT) reported.
Unlike cryptocurrencies, digital gold is firmly tied to the physical market. Each PGI unit represents a specific weight of gold stored in vaults, and transactions are recorded on the blockchain to ensure traceability. "We are trying to standardize that digital layer of gold, such that the various financial products used in other markets can be used in the gold market going forward," said David Tait, chief executive of the WGC, in an interview with the FT.
This makes PGIs a kind of "digital passport" for gold. The structure draws inspiration from earlier models such as gold-backed exchange-traded funds and stablecoins like Paxos Gold, which require 100 percent physical backing to prevent "empty circulation" and broaden gold's role in global finance.
BENEFITS AND BARRIERS
For institutional investors, the potential appeal is significant. Digitization could transform gold from a static store of value into an active financial instrument. "For the banks, from a collateral perspective, they will make a lot of money, as they get an opportunity to use the gold on their balance sheet as collateral," Tait told the FT.
According to the WGC, PGIs combine the best features of the two existing OTC structures: the security of physical ownership associated with allocated gold, but with added benefits such as easier collateralization, fractionalized investment, as well as easy and secure transfer of gold interests between parties.
Still, resistance runs deep. "Gold is already the best-performing asset class. This feels like a solution in search of a problem," said Adrian Ash, director of research at BullionVault, a Britain-based company facilitating the trading of physical gold globally.
Regulatory uncertainty adds further complexity. Whether gold tokens should be classified as securities or as commodity derivatives remains under discussion, with different jurisdictions taking varying approaches, resulting in a fragmented regulatory landscape for cross-border adoption.
While fiat-backed stablecoins have gained traction due to their liquidity and broad acceptance in financial markets, gold-backed tokens have struggled to achieve similar utility.
"Gold, by contrast, remains a store of value, but not a medium of exchange or a common unit of account," noted one industry analysis published on Medium. As a result, most gold tokens are used mainly for passive holding rather than active settlement.
A TOOL, NOT A REPLACEMENT
Despite the hurdles, digital gold is gaining momentum among investors, particularly younger generations.
According to HSBC's Affluent Investor Snapshot 2025, 41 percent of affluent investors plan to own gold within the next 12 months, while 28 percent plan to hold digital gold. The report highlights growing demand for tokenized gold, multi-asset solutions, and alternative investments among younger clients.
Analysts, however, stressed that digital gold is unlikely to displace physical bullion, which remains indispensable for central bank reserves and cultural consumption. Global central banks collectively hold around 36,000 tons of gold, according to the European Central Bank, and have added more than 1,000 tons annually in each of the past three years, a record pace.
For households, too, the physical appeal of gold remains strong. In Asia and the Middle East, jewelry still accounts for a significant portion of national gold demand.
In Britain, beyond investment value, bullion coins are sought after for their craftsmanship and cultural significance. The Royal Mint, Britain's official maker of British coins, noted on its website that series such as the "Myths and Legends" collection are prized not only for their purity but also for their artistry, making them popular both as assets and collectibles.
For many investors, the future may lie in a blended approach. Physical gold will continue to serve as a hedge against inflation and extreme financial shocks, while digital gold could provide liquidity, lower entry costs, and faster settlement, the Royal Mint added. ■
