Bank of England watchdog asks firms to disclose crypto exposure

2024-12-14 09:54:36 Primitive Reading

From cointelegraph by Stephen Katte

The Bank of England’s regulatory arm has requested that businesses disclose any current or future exposure to crypto by next March so it can monitor stability and help shape policy.

In a Dec. 12 statement, the Prudential Regulation Authority (PRA) asked firms to share their “current and expected future cryptoasset exposures” and explain their use of the crypto-regulating Basel framework.

“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 PRA said.

The Basel framework outlines capital and risk management requirements for banks’ exposure to crypto. It was introduced in December 2022 by the international banking regulator, the Basel Committee on Banking Supervision (BCBS).

The Basel framework classifies crypto assets into three broad categories based on their risk profiles. Source: BCBS

The PRA hopes that gathering current and intended crypto business activities can be used as a “base from which to monitor the financial stability implications of these assets.”

The regulator is asking for firms to take into account any future plans of crypto assets up to Sept. 30, 2029.

The questionnaire details several key areas the PRA wants firms to address, including how they are using the Basel framework for holding crypto assets and using permissionless blockchains.

“While there are benefits that these new types of ledgers can bring, they also pose risks such as lack of settlement finality, settlement failure, and no guaranteed link between the intended owner of the asset and the entity that may have control of the authentication, validation mechanism,” a part of the questionnaire reads.

Related: Bitcoin holdings of publicly listed firms increased to $20B in one year: Data

The PRA notes that the use of “permissionless blockchains cannot be sufficiently mitigated at present,” although it has listed this classification as remaining under review.

A growing number of firms globally are considering or taking the plunge to buy Bitcoin BTC$100,105, hoping to catch a windfall from the cryptocurrency that hit a milestone six-figure value early this month.

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