Bank of England Targets Crypto Risks with Enhanced Reporting Mandates by 2025
The Bank of England has intensified its focus on cryptocurrency risks, setting a March 24, 2025, deadline for firms to report their crypto asset exposure. This step aims to bolster financial stability and shape a comprehensive regulatory framework for digital assets.
On December 12, the Prudential Regulation Authority (PRA) issued a directive requiring firms to disclose their current and planned crypto holdings, while also outlining their strategies for managing risks under the Basel framework. This global standard, introduced by the Basel Committee in 2022, defines how banks should address exposure to digital assets. The PRA emphasized that this data will guide the calibration of regulations, ensuring a balanced approach to the costs and benefits of various policies.
Permissionless Blockchains Under Scrutiny
The PRA also highlighted concerns around permissionless blockchains, pointing to risks such as settlement failures and a lack of clear ownership control mechanisms. While acknowledging the potential benefits of blockchain technology, the PRA stressed that these risks remain challenging to address.
To streamline the process, the PRA categorized crypto assets into four groups under Basel standards. These range from tokenized traditional assets (Group 1a) to unbacked cryptocurrencies (Group 2b), with stricter capital requirements for riskier assets. Stablecoins, particularly those failing Basel criteria, are also expected to face tighter regulations.
Michael Egorov, founder of decentralized exchange Curve Finance, praised the PRA’s initiative as a step toward better understanding and regulating the crypto space. He noted, however, that concerns over settlement finality on established blockchains may highlight gaps in the regulator’s comprehension.
Data Collection to Guide UK Crypto Policy
Firms with significant crypto exposure are required to submit detailed responses, including forecasts assuming full implementation of Basel standards by 2029. The PRA clarified that firms without notable exposure are exempt from filing reports. This data will serve as a foundation for monitoring financial stability risks and shaping future policy.
Globally, regulators are stepping up their oversight of the crypto sector. The Australian Securities and Investments Commission (ASIC) recently proposed updates to its regulatory guidelines, while the UK’s Financial Conduct Authority (FCA) revealed that crypto ownership among UK adults has risen to 12% in 2023, up from 10% the previous year.
With this initiative, the Bank of England positions itself alongside other global regulators in addressing the rapidly evolving challenges posed by cryptocurrencies. Responses to the PRA’s mandate will play a pivotal role in defining the UK’s approach to crypto regulation in the coming years.