The FCA is working to accelerate the creation of crypto rules
Stablecoins were legalised in the UK under former PM Rishi Sunak
The UK does not recognise any cryptocurrency as a legal tender
The UK is looking to finalise its crypto laws by 2026
Photo Credit: Pixabay/ Sergei Tokmakov
The Bank of England (BoE) is trying to get the sense of how local businesses are viewing and engaging with cryptocurrencies in the UK. In a notable development, the Prudential Regulation Authority (PRA) has issued a directive to local enterprises to disclose their crypto holdings, if any. The PRA is touted as a BOE-affiliated financial watchdog in the UK. The development comes at a time when the UK is assessing the impact that virtual digital assets can have on its economy and financial systems, as part of efforts that started under former UK Prime Minister Rishi Sunak.
Like India, Russia, and the UAE, the UK has also been taking active steps to draft clear policies around cryptocurrencies. The directive issued by the PRA comes in alignment with this goal.
According to an official post from the BoE, local firms that are dabbling in crypto have been asked to submit this information by March 24, 2025.
“This will inform work across the PRA and the BoE on crypto assets by helping us calibrate our prudential treatment of cryptoasset exposures, analyse the relative costs and benefits of different policy options,” the BoE said. In a broader picture, the bank said, it will use this information to monitor the implications of crypto assets on the UK's financial stability and for framing policies.
In taking this step, the BoE is adhering to a 2022 instruction from the Basel Committee, which laid out standards for banks to assess the ‘prudential treatment of crypto asset exposure'.
“Supervisors should exercise their authority to require banks to address any deficiencies in their identification or assessment process of crypto asset risks. In addition, supervisors may recommend that banks undertake stress testing or scenario analysis to assess risks resulting from crypto asset exposures. Such analyses can inform assessments of the bank's capital adequacy,” the committee had said at the time.
The UK is working to finalise its crypto legislation by 2026. In November this year, UK's Financial Conduct Authority (FCA) said its proposed regulations will focus on ensuring a fair, transparent marketplace for crypto assets, free from manipulation and exploitation.
To ensure that its crypto-related decisions do not expose people to financial risks, the UK authorities are screening crypto firms closely. In September, the FCA revealed that 90 percent of recent crypto firm registration applications have been rejected because web3 firms are lacking prevention measures against frauds and money laundering.
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