tl;dr
The Bank of England has mandated firms to report their exposure to cryptocurrencies by March 24, 2025, aiming to enhance financial stability and develop a regulatory framework. The directive requires disclosure of current holdings, future plans, and use of permissionless blockchains. It categorizes ...
The Bank of England has mandated firms to report their exposure to cryptocurrencies by March 24, 2025, aiming to enhance financial stability and develop a regulatory framework. The directive requires disclosure of current holdings, future plans, and use of permissionless blockchains. It categorizes crypto asset exposure into four Basel-defined groups and asks firms to consider future scenarios under Basel standards. Responses are due by the deadline and will guide UK policy on crypto regulation. This move aligns with global efforts to address challenges in the crypto industry.
The Bank’s Prudential Regulation Authority (PRA) issued the directive on December 12, mandating firms to disclose their current crypto asset holdings, future plans, and application of the Basel framework for managing crypto-related risks. Firms are also required to detail their use of permissionless blockchains, which the PRA flagged as a significant concern due to risks such as settlement failure and the lack of a guaranteed link between asset ownership and control mechanisms.
The questionnaire breaks crypto asset exposure into four Basel-defined groups. Group 1a covers tokenized traditional assets that meet classification standards, while Group 1b includes stablecoins backed by reserves. Group 2a and Group 2b involve assets that fail to meet Basel conditions, including unbacked cryptos—and therefore face higher capital requirements.
The businesses must provide data on exposures, business activities, and how they manage crypto-asset risks. This data collection will serve as a baseline for monitoring financial stability risks associated with crypto assets and guide regulatory adjustments. Responses to the PRA’s request must be submitted by the March deadline, with findings expected to frame UK policy on crypto regulation in the coming years. The Bank of England joins global regulators worldwide to take action to address the expanding challenges of the crypto industry.