The Bank of England is set to unveil new proposals for regulating banks' crypto exposure by 2026, aiming to safeguard financial stability. In a speech at Risk Live Europe in London, David Bailey stated that the UK is likely to adopt a more cautious approach, encouraging banks to minimize their crypto exposure.
Bailey noted that certain cryptoassets, characterized by high price volatility and potential for total investment loss, may warrant stricter prudential treatment. The UK's regulations will be guided by the Basel Committee on Banking Supervision's disclosure framework, which requires implementation by 2026 to facilitate risk assessment.
The Committee has proposed a 1% exposure limit for banks investing in cryptocurrencies like bitcoin. The UK's plans will draw on the Basel Committee's standards, according to Bailey. This development comes as nations seek to maintain financial stability amidst crypto market volatility, particularly in the wake of the 2023 collapses of Silicon Valley Bank and Silvergate Bank, which had significant crypto client bases.
The UK's prudential crypto regulations will coincide with the introduction of a new crypto regime by the Financial Conduct Authority.