The PRA claimed that the move was intended to boost financial stability as well as shape central bank policy on regulating the industry.
The Bank of England’s regulatory body, the Prudential Regulation Authority PRA (PRA), recently issued a mandate requiring companies to disclose any exposure they have to crypto assets currently and in the future. This directive is due to be implemented by March 2025.
In a press release dated December 12, the PRA explained that the move is intended to boost financial stability and help shape central bank policy on regulating this growing sector.
The regulator asked companies to report on their “current cryptoasset exposures and their expected future exposures,” and to explain how they apply the Basel Framework–a regulatory framework introduced in December 2012 by the Basel Committee on Banking Supervision, BCBS to set capital management and risk management standards for crypto exposure.
Central Bank Seeks to Monitor Crypto’s Impact on Financial Stability
The central bank will use this data to monitor any financial stability issues that may arise from the increased role of cryptocurrency assets in the financial sector.
This report will provide a basis for the PRA’s and Bank of England’s work on cryptoassets. We can use it to help us assess the risks and benefits of different policies and analyze our prudential treatment of these assets.
The directive also extends to future exposure. Businesses must account for any plans that they have to engage in crypto assets up until September 30, 2029.
The PRA’s questionnaire highlights a number of key areas, including how companies are implementing Basel and their use of permissionless chains.
The regulator voiced specific concerns about permissionless Blockchains. Risks such as failed settlements, lack of settlement finality and absence of guaranteed linkage between asset ownership and control of the authentication mechanisms were cited.
The PRA noted that, as of today, the risks associated with blockchains without permission “cannot be adequately mitigated,” though it acknowledged this classification is under review.
This directive comes at a time when more global companies are increasing their exposure, especially to Bitcoin.
Boyaa Interactive International in Hong Kong, for example, transferred $50 million of Ether from November 29 to Bitcoin.
Metaplanet is a Japanese investment group that announced plans the day before to raise over $60 million in order to buy more Bitcoin for their treasury. They already hold 1,142 Bitcoin worth $114,000,000.
The U.K. Implements Stablecoin Regulation
Dante Disparte of Circle, global head of policies, said that the United Kingdom should implement rules for stablecoins over a few weeks.
Tulip Siddiq was appointed as Economic Secretary for the Treasury in November. She revealed that she is planning to introduce a comprehensive regulation framework for the cryptocurrency sector by the beginning of next year.
The proposed framework will consolidate all regulations for stablecoins (and staking) into one uniform regime.
The US stablecoin markets, with a current value of over 200 billion dollars, remain unregulated.
Singapore has also enacted formal legislation for the stablecoins industry.
In recent times, the United Arab Emirates has given regulatory approval for a new stablecoin backed by the dirham of the UAE.
Dubbed AE coin, this cryptocurrency aims to be a stablecoin backed fully by UAE reserve funds.
