Bank of England Demands Crypto Exposure Disclosures by March

The Bank of England’s regulatory arm, the Prudential Regulation Authority (PRA), has called on businesses to disclose their current and planned crypto asset exposures by March 2024. In a statement released on Dec. 12, the PRA urged firms to outline their “current and expected future cryptoasset exposures” and detail their compliance with the Basel framework for regulating crypto activities. “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 PRA stated. The Basel framework, introduced by the Basel Committee on Banking Supervision in December 2022, defines capital and risk management standards for banks exposed to cryptocurrencies. The PRA aims to use the collected data as a foundation for monitoring the financial stability risks posed by crypto assets. Firms are required to account for their crypto-related plans extending through September 30, 2029. The PRA’s questionnaire highlights critical areas of interest, including firms’ application of the Basel framework and their use of permissionless blockchains. “While there are benefits that these new types of ledgers can bring, they also pose risks such as lack of settlement finality, settlement failure, and no guaranteed link between the intended owner of the asset and the entity that may have control of the authentication, validation mechanism,” the questionnaire states. The PRA emphasized that risks tied to permissionless blockchains “cannot be sufficiently mitigated at present” but noted that the classification remains under review. Globally, companies are increasingly investing in Bitcoin, spurred by its historic six-figure valuation. On Nov. 29, Hong Kong-based Boyaa Interactive International disclosed a treasury adjustment, swapping $50 million in Ether for Bitcoin. A day earlier, Japan’s Metaplanet announced plans to raise $62 million to increase its Bitcoin treasury, which already holds over $114 million in assets.