The PRA is requesting crypto asset disclosures from firms to shape regulations, address risks, and ensure financial stability.
The Prudential Regulation Authority (PRA), a division of the Bank of England, has asked firms to disclose their current and future crypto assets, including tokenized assets and stablecoins.
The financial watchdog announced this in a statement released to the public on December 12, asking firms to provide detailed information on their current and expected future crypto-asset exposures. It also requested firms to explain how they have applied the crypto regulatory Basel framework.
PRA Requests Comprehensive Crypto Asset Data
The PRA noted that this data would help shape its rules and policies, set fair requirements for firms dealing with crypto, evaluate the pros and cons of various approaches, and understand firms’ current activities and future intentions regarding crypto assets. It emphasized that this effort would serve as a foundation for tracking and addressing potential threats to financial stability posed by crypto assets. The PRA stated:
“This will inform work across the PRA and the Bank of England on cryptoassets by helping us calibrate our prudential treatment of cryptoasset exposures, analyse the relative costs and benefits of different policy options and providing an updated view of firms’ current and intended cryptoasset-related business activities as a base from which to monitor the financial stability implications of these assets.”
The PRA stressed that firms should provide comprehensive information about their crypto asset-related activities at the highest consolidated level within the UK, where applicable. It clarified that firms not involved with crypto assets need not respond. Firms are expected to complete only the relevant sections of the request and can omit the rest. The PRA noted:
“If firms do not have any relevant cryptoasset exposures, businesses or activities, we are not requesting a “nil return”. It may be the case that some aspects of this template are relevant to particular firms and others not. If that is the case, then we are requesting firms complete only the parts of the template that are relevant to them.”
The financial watchdog’s questionnaire asks firms to consider any plans for crypto assets up to September 30, 2029. Firms have until March 24, 2025, to respond.
Permissionless Blockchains Under Review
The questionnaire covers various areas, including how firms use permissionless blockchains. The PRA explained that permissionless blockchains could be used to hold crypto assets or provide services involving their transfer. However, despite their advantages, they pose risks such as settlement failures and challenges in ensuring that the rightful owner controls authentication or validation within the system. The financial regulator stated that the use of permissionless blockchains currently represents a threat that cannot be fully managed, warranting further review.
Bitcoin BTC $94 524 24h volatility: 0.1% Market cap: $1.88 T Vol. 24h: $28.11 B has had a major price rise recently, hitting a new all-time high of $103,000. This has prompted many top organizations to consider acquiring the digital asset, viewing it as a hedge against inflation. This surge in crypto asset accumulation by major firms has drawn the attention of financial regulators, necessitating adjustments to existing rules and policies.
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