The Bank of England’s regulatory arm, the Prudential Regulation Authority (PRA), has issued a directive requiring businesses to disclose their current and anticipated exposure to crypto assets by March 2025.
In a statement dated December 12, the PRA said the move aims to bolster financial stability and shape the central bank’s approach to regulating the burgeoning sector.
The regulator asked firms to report their “current and expected future cryptoasset exposures” and to outline their application of the Basel framework—a regulatory standard introduced in December 2022 by the Basel Committee on Banking Supervision (BCBS) to set capital and risk management requirements for crypto exposure.
Central Bank Seeks to Monitor Crypto’s Impact on Financial Stability
The central bank aims to use this information to monitor the financial stability implications posed by the growing role of crypto assets within the financial system.
“This will inform work across the PRA and the Bank of England on cryptoassets by helping us calibrate our prudential treatment of cryptoasset exposures, [and] analyze the relative costs and benefits of different policy options.”
The directive extends beyond current exposure, with firms required to account for any future plans to engage with crypto assets through to September 30, 2029.
The PRA’s questionnaire highlights several critical areas of interest, including how firms are implementing the Basel framework and their use of permissionless blockchains.
The regulator expressed specific concerns about permissionless blockchains, citing risks like settlement failures, lack of settlement finality, and the absence of a guaranteed link between asset ownership and control of authentication mechanisms.
The PRA noted that, as of now, the risks associated with permissionless blockchains “cannot be sufficiently mitigated,” though it acknowledged that this classification remains under review.
This directive comes as more global firms increase their exposure to crypto assets, notably Bitcoin.
For example, on November 29, Hong Kong-based Boyaa Interactive International shifted nearly $50 million worth of Ether into Bitcoin.
A day earlier, Japanese investment firm Metaplanet announced plans to raise over $62 million to purchase additional Bitcoin for its treasury, which already holds 1,142 Bitcoin valued at over $114 million.
The U.K. to Implement Stablecoin Regulations
The United Kingdom is expected to implement regulations for stablecoins within a matter of months, according to Dante Disparte, the global head of policy at Circle.
Last month, Economic Secretary to the Treasury Tulip Siddiq also revealed that the country plans to introduce a comprehensive regulatory framework for the cryptocurrency sector early next year.
The proposed framework will consolidate regulations for stablecoins and staking services under one unified regime.
Notably, the stablecoin market, currently valued at over $200 billion, remains unregulated in the United States.
Meanwhile, Singapore has established formal laws for the stablecoin industry.
More recently, the United Arab Emirates issued regulatory approval to a new stablecoin, pegged to the UAE dirham.
Dubbed ‘AE Coin’, the cryptocurrency is positioning itself as a stablecoin that is fully backed by reserves held within the UAE.
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