The Prudential Regulation Authority (PRA), part of the Bank of England, has issued a request to businesses to disclose their crypto asset exposures by March 2024. The initiative aims to enhance the monitoring of financial stability related to cryptocurrencies and assist in developing effective policies in this evolving sector. The PRA is focusing on both current and anticipated future engagements with crypto, seeking insights on how firms are implementing the Basel regulatory framework for managing crypto asset risks.
The Basel framework, introduced by the Basel Committee on Banking Supervision in December 2022, establishes essential capital and risk management guidelines for banks dealing with cryptocurrencies. The PRA’s request underlines the importance of understanding the complexities of crypto asset dealings within firms to evaluate potential financial stability risks. Additionally, the regulatory body is encouraging firms to consider their future plans concerning crypto holdings up until September 30, 2029.
The PRA’s survey outlines several critical areas of focus, including the application of the Basel guidelines for crypto exposure, management of crypto asset holdings, and the use of permissionless blockchains. While acknowledging the benefits presented by these new technologies, the PRA also points out significant risks they carry, such as issues with settlement finality and authentication verification.
As interest in cryptocurrency continues to grow, an increasing number of firms worldwide are exploring or actively acquiring Bitcoin in hopes of capitalizing on the asset’s recent surge in value, which recently reached six figures. Notably, companies such as Boyaa Interactive International and Japanese investment firm Metaplanet have taken substantial steps in adjusting their treasury strategies to include Bitcoin , highlighting the trend among businesses to reconsider their financial portfolios in light of crypto’s potential for growth and volatility.
