- The Prudential Regulation Authority (PRA) requests businesses to disclose crypto-asset exposures to inform regulatory policy.
- Firms must report current and future crypto activities through March 2024.
- The Prudential Regulation Authority (PRA) highlights the risks of permissionless blockchains and seeks long-term plans until 2029.
- This aligns with global efforts, including the Basel framework for crypto asset regulation.
The Bank of England’s regulatory division, the Prudential Regulation Authority (PRA), has formally called on businesses to reveal their current and future crypto-asset exposures to increase financial stability and to help inform policy direction as cryptocurrencies become more important to the global financial system.
In its December 12 statement, the PRA outlined its expectations for firms to report their present crypto activities and projected involvement through March 2024. The data collected will assist the Bank of England in tailoring its approach to regulating digital currency exposures and evaluating the trade-offs of potential policies.
“This will inform work across the PRA and the Bank of England on crypto-assets by helping us calibrate our prudential treatment of crypto-asset exposures and analyze the relative cost and benefit of the various policy options,” highlighted PRA.
The announcement comes amidst the fact that the Basel Committee on Banking Supervision’s 2022 framework for managing banks’ digital currency exposures is gaining traction. Under this framework, it goes without saying how banks handle capital and risk against digital assets, which creates a bedrock of regulation against which volatility and complexity in the sector are checked.
Permissionless Blockchains and Crypto Plans Spark PRA Attention
The PRA’s questionnaire also sheds light on permissionless blockchains—public ledgers often used in cryptocurrency transactions. While such blockchains offer innovative benefits, the PRA warns they come with unresolved risks, such as settlement failures and ambiguous ownership authentication. For now, the regulator maintains a cautious stance, citing that these risks remain inadequately mitigated.
The PRA is not just focused on the present but also seeks insights into crypto-related plans extending through September 2029. This long-term horizon underscores the authority’s commitment to proactively managing the evolving role of digital currency in the financial ecosystem.
Key areas of interest include how firms are applying the Basel framework to their digital currency holdings and integrating permissionless blockchain technologies into their operations. This intensified scrutiny aligns with a global trend of institutions embracing cryptocurrencies like Bitcoin, which recently achieved a historic six-figure price milestone. Firms in Asia, in particular, have been leading this charge.
Metaplanet Plans to Raise 62 Million to Expand Bitcoin Holdings
In late November, Hong Kong-based Boyaa Interactive International revealed a strategic treasury adjustment, converting $50 million worth of Ether into Bitcoin. Around the same time, Japan’s Metaplanet announced plans to raise $62 million to expand its Bitcoin holdings, which already total over 1,100 BTC.
The Bank of England’s call for transparency reflects a wider effort to balance the opportunities and challenges associated with digital currency. As more businesses integrate digital assets into their portfolios, regulators worldwide are navigating uncharted waters to safeguard financial stability while fostering innovation.
The PRA may have started on a stronger course and better informed about the nature of regulation that will truly serve to make crypto’s present growth consistent with integrity within the financial system.
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