Bank of England Demands Firms to Disclose Crypto Asset Exposure by March 2025

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In a latest development, the Bank of England’s regulatory arm, the Prudential Regulation Authority (PRA), has issued a directive that requires businesses to disclose their current and anticipated exposure to crypto assets by March 2025. This development comes as the UK evaluates the impact of virtual digital assets on its economy and financial systems.

In a statement dated December 12, the PRA noted that this move aims to improve financial stability and shape the central bank’s approach to regulating the rapidly growing sector.

Notably, the regulator has asked firms to report their “current and expected future cryptoasset exposures” and to outline their application of the Basel framework, which is a regulatory standard introduced in December 2022 by the Basel Committee on Banking Supervision (BCBS) to set capital and risk management requirements for crypto exposure.

“This will inform work across the PRA and the Bank of England on cryptoassets by helping us calibrate our prudential treatment of cryptoasset exposures, [and] analyze the relative costs and benefits of different policy options,” the statement emphsized. 

Notably, the directive goes beyond current exposure, which requires firms to consider any future plans to engage with crypto assets until September 30, 2029. The PRA’s questionnaire spotlights several crucial areas of interest, like how firms are implementing the Basel framework and their use of permissionless blockchains.

The regulator voiced specific concerns about permissionless blockchains, mentioning risks like settlement failures, lack of settlement finality, and the absence of a guaranteed link between asset ownership and control of authentication mechanisms.

While the PRA noted that, as of now, the risks associated with permissionless blockchains “cannot be sufficiently mitigated,” it acknowledged that this classification remains under review. This directive comes as more global firms increase their exposure to crypto assets, notably Bitcoin.

For instance, on November 29, Hong Kong-based Boyaa Interactive International moved nearly $50 million worth of Ether into Bitcoin. A day before, Metaplanet announced plans to raise over $62 million to purchase additional Bitcoin for its treasury, which already holds 1,142 Bitcoin valued at over $114 million.