The United Kingdom’s Prudential Regulatory Authority (PRA) has announced plans to propose a set of rules for the issuance and holding of digital assets. The decision comes as the use of digital assets continues to grow and evolve globally, and the PRA aims to ensure that banks and other financial institutions operating in the UK can do so safely and securely.
The proposal will be developed in accordance with the Basel III rules, a global regulatory framework for banking institutions, as well as the Financial Services and Markets (FSM) bill currently under consideration by the UK Parliament. This ensures that the UK’s regulatory framework is aligned with international standards and is comprehensive in its approach to managing digital assets.
Vicky Saporta, executive director of the Prudential Policy Directorate at the Bank of England, made the announcement in a speech delivered at the bank on February 27. Saporta emphasized that the PRA’s goal is to develop a regulatory framework that is proportionate to the risks associated with digital assets while remaining flexible enough to adapt to the rapidly changing market.
The proposed rules are expected to address a range of issues related to digital assets, including custody, governance, risk management, and disclosure requirements. The PRA’s approach will be informed by ongoing discussions with industry stakeholders and other regulatory bodies, as well as by best practices observed in other jurisdictions.
This move by the PRA represents a significant step forward in the regulation of digital assets in the UK. While digital assets have been gaining popularity in recent years, there has been little regulatory oversight, leading to concerns about investor protection and financial stability. The proposed rules will help to address these concerns and provide greater clarity and certainty for financial institutions operating in the UK.
In addition to the proposed rules from the PRA, the UK government has been taking steps to enhance its regulatory framework for digital assets. The Financial Conduct Authority (FCA), the UK’s financial regulator, has implemented a registration scheme for cryptocurrency firms operating in the country, and is considering additional measures to enhance investor protection and market integrity.
Overall, the UK’s approach to regulating digital assets is reflective of a broader global trend towards greater regulatory oversight. As digital assets continue to evolve and become more mainstream, it is likely that regulatory frameworks will continue to evolve as well, with the aim of promoting investor protection and financial stability while supporting innovation and growth in the sector.