Bank of England to Propose New Crypto Regulations for Financial Stability by 2026

Introduction to the Upcoming Regulations

The Bank of England is preparing to unveil new regulations regarding banks’ interactions with cryptocurrencies by 2026, aimed at enhancing financial stability, according to a key official’s statements made Wednesday.

Strategic Approach Toward Crypto Exposure

In a speech delivered at Risk Live Europe in London, David Bailey, the Bank’s executive director of prudential policy, mentioned that the U.K. intends to adopt a more cautious stance regarding banks’ crypto exposure. He indicated that the approach would advocate for minimal involvement of banks in the cryptocurrency sector.

Bailey articulated that some instances may warrant a stricter initial approach while data is accumulated to determine if the guidelines can be adjusted to be more lenient over time. He specifically pointed out the importance of prudential oversight concerning banks’ investments in volatile cryptoassets, where there’s a significant risk of total loss for investors.

Implementation of International Guidelines

The U.K. is set to align its regulations with the Basel Committee on Banking Supervision’s disclosure framework, which must be implemented by early 2026. This framework is designed to assist nations in assessing associated risks. The Committee has also suggested that banks should limit their cryptocurrency holdings, such as Bitcoin, to no more than 1%.

Bailey emphasized that the plans for the U.K. will be guided by the standards proposed by the Basel Committee.

Ensuring Financial Stability Amid Crypto Volatility

Following the upheavals experienced by Silicon Valley Bank and Silvergate Bank in 2023, there’s a growing international focus on maintaining financial stability despite the volatility inherent in cryptocurrencies. Authorities are keenly observing the extent to which banks are connected to the crypto market.

Future Regulatory Landscape

The Bank of England’s forthcoming crypto regulations will coincide with a new regulatory framework for cryptocurrencies from the Financial Conduct Authority, the country’s other financial regulatory body.