In a latest development, the Bank of England’s regulator, the Prudential Regulatory Authority (PRA), has issued a directive requiring firms to disclose their current and planned exposure to crypto assets by March 2025. This development comes as the UK assesses the impact of virtual digital assets on its economy and financial systems.
In a statement dated December 12, the PRA noted that the move was aimed at improving financial stability and shaping the central bank’s approach to regulating a rapidly growing sector.
Current and Future Crypto Exposure
The regulator notably asked companies to declare their “current and future exposures to crypto-assets” and to describe their application of the Basel framework, which is a regulatory standard introduced in December 2022 by the Basel Committee on Banking Supervision (BCBS ) to fix the capital. and risk management requirements for crypto exposure.
“This will inform the work of the PRA and the Bank of England on crypto assets by helping us to calibrate our prudential treatment of exposures to crypto assets (and) to analyze the relative costs and benefits of different policy options”, underlines the press release.
Notably, the directive goes beyond the current exposure, which requires companies to consider any future plans to use crypto assets until September 30, 2029. The PRA questionnaire highlights several crucial areas of focus , such as how companies are implementing the Basel framework and their use of permissionless blockchains.
Concerns about permissionless blockchains
The regulator expressed specific concerns regarding permissionless blockchains, citing risks such as settlement failure, lack of settlement finality, and lack of a guaranteed link between ownership of assets and control of settlement mechanisms. ‘authentication.
Although the PRA noted that, for now, the risks associated with permissionless blockchains “cannot be sufficiently mitigated,” it acknowledged that this classification remains under review. This directive comes as more global companies increase their exposure to crypto assets, including Bitcoin.
For example, on November 29, Hong Kong-based Boyaa Interactive International transferred nearly $50 million from Ether to Bitcoin. The day before, Metaplanet announced plans to raise over $62 million to purchase additional Bitcoin for its treasury, which already holds 1,142 Bitcoins valued at over $114 million.
