The Bank of England’s Prudential Regulation Authority (PRA) has called on businesses to disclose their current and projected exposure to cryptocurrencies by March 2024. This move, outlined in a December 12 statement, aims to monitor financial stability risks while informing the regulator’s approach to crypto-related policies.
The PRA’s request extends beyond current holdings, seeking insights into planned crypto activities through September 2029. Firms are also required to detail their adherence to the Basel framework, a global standard for managing risks associated with crypto assets introduced by the Basel Committee on Banking Supervision (BCBS) in December 2022.
“This initiative will help us calibrate our prudential treatment of cryptoasset exposures and assess the costs and benefits of various policy options,” the PRA noted. The regulator intends to use this data to evaluate the financial stability implications of cryptocurrencies and their integration into traditional financial systems.
Permissionless Blockchains Under Scrutiny
A focal point of the PRA’s inquiry revolves around permissionless blockchains. The regulator’s questionnaire highlights concerns such as settlement risks, lack of finality, and potential mismatches between ownership intent and control over authentication mechanisms.
While acknowledging potential benefits, the PRA warned that the risks posed by permissionless blockchains remain inadequately mitigated. This classification will stay under review, underscoring the authority’s cautious approach toward integrating decentralized ledger technologies into regulated frameworks.
In addition, firms are expected to provide a comprehensive assessment of their crypto strategies, including their use of permissionless blockchains and other decentralized technologies. This marks a significant step in aligning the UK’s regulatory landscape with evolving global standards.
Growing Interest in Crypto Treasury Assets
As the PRA tightens oversight, global interest in crypto assets continues to surge. Businesses like Hong Kong’s Boyaa Interactive and Japan’s Metaplanet are reallocating treasury assets toward Bitcoin, capitalizing on the cryptocurrency’s recent rally past six figures.
Boyaa Interactive recently swapped $50 million worth of Ether for Bitcoin, while Metaplanet announced plans to raise $62 million to expand its Bitcoin holdings. These moves reflect a broader trend of companies leveraging crypto assets for diversification and potential growth, even as regulatory scrutiny intensifies worldwide.
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