Bank of England set to introduce stringent rules in 2026
The Bank of England (BoE) plans to introduce more restrictive rules on banks' exposure to digital assets by 2026 to protect financial stability, according to its top executive.
During the 'Risk Live Europe' event in London, David Bailey, executive director of prudential policy at the BoE, said that the United Kingdom is exploring stricter regulations around digital asset exposure.
'There are also examples where it might be more appropriate to start more towards the restrictive end of the spectrum, while evidence is gathered to see if standards can be relaxed over time,' said Bailey during his speech at the risk management and financial markets conference, as reported by CoinDesk. 'The prudential treatment of banks' exposures to cryptoassets, and specifically those with features associated with heightened price volatility and where investors could lose the entirety of their investment, is an example in this space.'
Bailey also said that the U.K.'s plans would be 'informed' by the guidelines set out by the Basel Committee on Banking Supervision's (BCBS) disclosure framework for banks' exposure to digital assets.
The Committee—an international body that sets global standards for the regulation and supervision of banks to promote financial stability and strengthen banking systems—finalized its framework for banks' 'disclosure of cryptoasset exposures' in July of last year and agreed to implement the standard by January 1, 2026.
The final disclosure framework includes a set of standardized tables and templates covering banks' digital asset exposures, requiring banks to disclose qualitative information on their digital asset-related activities and quantitative information on the capital and liquidity requirements for their digital asset exposures.
'The use of common disclosure requirements aims to enhance information availability and support market discipline,' said the BCBS when announcing the final framework.
Additionally, the Basel Committee recommended that banks only allow 1% of their investments to be in digital assets, a factor that likely plays into the BoE's mooted, more restrictive rules on digital asset exposure. The BoE's latest pronouncement on digital asset policy comes as HM Treasury and the U.K.'s finance sector regulators are speeding up progress on the country's broader digital asset regulatory framework.
UK regulatory progress
In April, the Treasury published high-level draft regulations for cryptoassets and stablecoins. Titled the 'future financial services regulatory regime for cryptoassets,' it officially delegated detailed rulemaking authority of the majority of the digital asset space to the Financial Conduct Authority (FCA), except for systemic stablecoins, which fall under the purview of the BoE and the U.K.'s banking regulator, the Prudential Regulation Authority.
It also outlined several high-level digital asset activities that would bring an entity within U.K. regulation, placing foreign issuers of stablecoins outside this scope.
This was followed, in May, by the FCA—the U.K.'s top finance sector regulator—publishing two consultation papers, one on 'stablecoin issuance and cryptoasset custody,' and the other on 'a prudential regime for cryptoasset firms.'
The consultation paper on stablecoin issuance and cryptoasset custody aims to ensure regulated stablecoins maintain their value and that customers are provided with clear information on how the backing assets are managed. Meanwhile, the consultation paper on a prudential regime for cryptoasset firms seeks to establish rules to develop a safe, competitive, and sustainable digital asset sector.
However, all of this regulatory progress must be taken in context with the U.K. Chancellor of the Exchequer, Rachel Reeves, indicating that the country plans to work with the United States to support innovation across the digital asset industry.
In an April 29 statement, Reeves set out the U.K.'s stool by saying she aims to make the country the 'best place in the world to innovate.'
The Chancellor also said that the U.K. and U.S. would use their upcoming joint 'Financial Regulatory Working Group' to 'continue engagement to support the use and responsible growth of digital assets.'
Aligning with President Donald Trump's pro-crypto regulatory agenda would signal a shift away from the more safety-first and consumer protection approach that has characterized how digital assets have been treated thus far in the U.K. under the financial promotion regime—currently the only major piece of regulation in the country that deals directly with the digital asset sector.
Watch: Richard Baker on engineering a smarter financial world with blockchain
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