Originally published on: December 13, 2024
The Bank of England’s regulatory arm is shaking up the crypto world by asking businesses to spill the beans on their current and future crypto exposure by March of next year. This move aims to monitor stability and influence policy decisions in the ever-evolving crypto landscape.
In a recent statement, the Prudential Regulation Authority (PRA) urged companies to come clean about their “current and expected future cryptoasset exposures,” shedding light on their use of the Basel framework for crypto regulation.
By sharing this information, firms can help the PRA and the Bank of England fine-tune their approach to managing cryptoasset exposures and weigh the pros and cons of different policy options. The Basel framework introduces capital and risk management standards for banks dealing with crypto assets, dividing them into three risk categories based on their profiles.
The PRA sees this initiative as a crucial step in monitoring the financial stability implications of crypto assets. The regulator is also looking for insights into how firms plan to utilize crypto assets up to 2029, emphasizing the significance of understanding their future crypto activities.
The questionnaire distributed by the PRA covers various aspects it wants firms to address, including their utilization of the Basel framework and permissionless blockchains. While acknowledging the benefits of these new ledger technologies, the regulator also highlights risks like settlement failures and lack of ownership verification in the crypto realm.
Despite the challenges posed by permissionless blockchains, the PRA is leaving this classification under review, indicating a willingness to adapt to the ever-changing crypto landscape. This proactive approach aligns with the growing global interest in cryptocurrencies, with more companies exploring opportunities to invest in assets like Bitcoin.
Recent reports of companies like Boyaa Interactive International and Metaplanet diversifying their treasury assets by allocating substantial amounts to Bitcoin highlight this trend. As the crypto market continues to mature, regulatory bodies like the PRA are taking steps to understand and regulate this dynamic space.
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