The Bank of England has announced plans to introduce new proposals for regulating banks’ activities in the cryptocurrency sector by 2026 to safeguard the financial stability of the country.
Bank of England and Crypto Regulation
At the Risk Live Europe event in London, David Bailey, Executive Director of Prudential Policy at the Bank of England, stated that the UK aims to implement stricter regulations for banks regarding their cryptocurrency activities. Bailey indicated that banks will likely be encouraged to keep their crypto exposure low.
Measures to Prevent Financial Instability
Many countries have been taking measures to address financial instability resulting from cryptocurrency volatility. This is particularly relevant following the collapse of Silicon Valley Bank and Silvergate Bank in 2023, which had a significant number of crypto-related clients. Bailey emphasized the need for stricter regulations to gather data and analyze the possibility of easing rules in the future.
Changes in Crypto Regulation in the UK
The UK intends to implement a disclosure framework for banks' crypto exposure based on the Basel Committee on Banking Supervision's recommendations, which should be completed by early 2026. Bailey highlighted that countries need to assess risks associated with such assets and recommended that banks allow only 1% of their investments in cryptocurrencies like Bitcoin.
The Bank of England and other financial regulators in the UK are adapting their policies toward cryptocurrencies to ensure financial stability and protect investors, particularly in light of past banking crises.
