The United Kingdom’s bank regulator, the Prudential Regulatory Authority (PRA), will propose rules for issuing and holding digital assets, Bank of England (BOE) executive director of the Prudential Policy Directorate Vicky Saporta said in a speech at the bank Feb. 27. The rules will be developed with consideration for Basel III rules and the Financial Services and Markets (FSM) bill now being considered by the Parliament.
The FSM bill, which had its second reading in the House of Lords in January, would give the PRA the new secondary objective of facilitating U.K. international economic growth. To this end, Saporta said, “PRA rule making can deliver three things: harness the UK’s strengths as a global financial centre, maintain trust in the UK as a place to do business, and tailor regulations to UK circumstances.” She added:
“We will also be proposing rules about issuing and holding digital assets.”
The BOE and PRA are working with six other agencies to create a “regulatory grid setting out our plans in one place,” Saporta said. That new framework will replace the “labyrinth” of regulations currently in force, many of which are European Union (EU) rules. The U.K. withdrew from the EU in 2020.
The PRA “will be consulting on an implementation” of the Basel 3.1 standards once they are finalized, Saporta said. Those standards would call for banks to limit their exposure to cryptocurrencies to 1% of their capital, with a 1,250% risk premium. The EU is considering similar legislation. Saporta said:
“I also believe that it is normally easier for internationally active firms to follow one global rulebook instead of having to meet the expense of adapting to a patchwork of local standards.”
In addition, the FSM would extend current BOE regulations for payment systems and e-money to stablecoins, and after consultations, the PRA intends that “new standards for PRA-regulated firms will be coherent with rules for other sectors,” Saporta noted.
Very irritating @bankofengland speech today from its executive director for prudential policy
Vicky Saporta asserts the BoE’s new secondary objective will spur change.
She talks about changes BoE is implementing.
Never once explains how the former drives the latter
— Chris Giles (@ChrisGiles_) February 27, 2023