UK banking regulator will propose crypto issuance, and holding regulations once Basel 3 completed

Under the currently pending Financial Services and Markets law, the Bank of England’s Prudential Regulation Authority will promote worldwide economic development.

Bank of England (BOE) executive director of the Prudential Policy Directorate Vicky Saporta announced in a speech on February 27 that the UK’s bank regulator, the Prudential Regulation Authority (PRA), would propose rules for issuing and owning digital assets. The guidelines will be drafted with Basel III and the Financial Services and Markets (FSM) bill now under discussion by the Parliament in mind.

The FSM bill, which received its second reading in the House of Lords in January, would give the PRA the additional secondary aim of promoting international economic development in the United Kingdom. To this aim, Saporta said, “PRA rule making may accomplish three goals: leveraging the United Kingdom’s capabilities as a global financial centre, maintaining confidence in the United Kingdom as a location to conduct business, and tailoring laws to UK conditions.” She went on: “We will also propose guidelines for the issuance and storage of digital assets.”

Saporta said that the BOE and PRA are collaborating with six other agencies to establish a “regulatory grid outlining our goals in one location.” This new framework will replace the present “complex” of laws, the majority of which are European Union (EU) requirements. In 2020, the United Kingdom withdrew from the European Union.

Saporta said that after the Basel 3.1 standards are completed, the PRA would “consult on a possible implementation.” These regulations would require banks to restrict their exposure to cryptocurrencies to one percent of their capital, with a risk premium of 1,250%. The European Union is contemplating similar measures. Saporta said:

“I also feel that it is often simpler for globally active companies to adhere to a single worldwide regulation rather than paying the price of adjusting to a patchwork of local norms.”

Furthermore, the FSM would extend existing BOE laws for payment networks and digital payments to stablecoins. Saporta said that after discussions, the PRA plans for “new requirements for PRA-regulated enterprises to be consistent with those for other sectors.”

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