British banking regulator proposes rules for issuing, storing digital assets

Bank of England executive director Vicky Saporta speaks on proposed rules for issuing and owing digital assets.

The United Kingdom’s bank regulator, the Prudential Regulation Authority (PRA), will propose rules for issuing and owning digital assets, Bank of England (BOE) executive director of the Prudential Policy Directorate Vicky Saporta stated in a speech on February 27.

The guidelines will be formulated in light of Basel III regulations and the Financial Services and Markets (FSM) law now being examined by the Parliament.

The FSM bill, which received its second reading in the House of Lords in January, would give the PRA the additional secondary aim of fostering international economic development in the United Kingdom.

To this aim, Saporta said, “PRA rule making may accomplish three objectives: leveraging the United Kingdom’s capabilities as a global financial center, maintaining confidence in the United Kingdom as a location to do business, and tailoring laws to UK conditions.” Saporta stated.

“We will also be proposing rules about issuing and holding 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 “maze” of laws, the majority of which are European Union (EU) guidelines. 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 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.”

Also, the Financial Services and Markets would extend existing Bank of England laws for payment systems and e-money to stablecoins, and after discussions, the PRA expects for “new requirements for PRA-regulated enterprises to be consistent with rules in other sectors,” Saporta stated.