A collection of interconnected publications reminds financial institutions of their obligations and examines the situation of crypto regulation in the United Kingdom.
Crypto regulation is being evaluated by the Bank of England Financial Policy Committee and other UK regulations after publishing papers on financial stability about crypto assets and decentralized finance.
On Thursday, the Bank of England released a report, and the Financial Conduct Authority, or FCA, and the Bank’s Prudential Regulation Authority, or PRA, both produced documents that mention each other.
In its 40-page study, the Bank’s committee noted that crypto assets and DeFi represent a “limited” danger to the UK financial system’s stability, but that risk is growing “as these assets become more integrated with the wider financial system.” The FPC promised to assess the risks and provide recommendations in response.
The present regulatory structure was determined to be adequate for minimizing risks when crypto technology was used for the same purposes as traditional finance, according to the research. The FPC expressed support for international attempts to regulate Defi applications and “welcomed” the Treasury’s plans for crypto regulation, including the idea to bring the Bank into the process.
Until the regulatory environment is more robust, the FPC encouraged financial institutions to “take an extra cautious and conservative approach to any implementation” of crypto assets or DeFi. In this context, PRA Deputy Governor and CEO Sam Woods addressed a “Dear CEO” letter to banks, insurance companies, and authorized investment firms on crypto-asset exposure, citing the FPC report and the FCA notification.
In light of their growing interest, the majority of the Woods letter is devoted to reminding the recipients of current rules and regulatory frameworks. The letter also requests that a survey on the organizations’ current crypto exposure and intentions for the year be completed by June 3.
The FCA reminded regulated enterprises of their “existing obligations when they interact with or are exposed to crypto-assets and related services,” according to the warning. It went over a litany of such responsibilities, including “being transparent with consumers” about regulation and risk, as well as prudential and custodial considerations.
The FCA focused on anti-money laundering and registration, highlighting its extensive list of unregistered crypto-asset enterprises. Several such businesses are being investigated by the agency. The crypto regulation works to ensure all unregistered and temporarily registered crypto firms in the United Kingdom must complete registration by March 31 or face closure.
This was not the whole extent of the Bank of England’s crypto-related documents, which were revealed on March 24. Also included were “Responses to the Bank of England’s Discussion Paper on New Forms of Digital Money.” It alluded to the Bank’s discussion paper on central bank digital money, which was released last year. This year, the Bank and Treasury will “start a consultation” on CBDC, according to the FPC.