Draft Foreign Exchange of the Bank of England on Electronic Money by 2026
The Bank of England (BoE) is preparing to propose exposure limits for credit institutions to cryptocurrency, expected to take effect in 2026. The goal is to protect financial stability from the atypical fluctuations of the cryptocurrency market. During a session at the Risk Live Europe event in London, David Bailey, BoE's Director of Prudential Policy, confirmed plans to tighten regulations on banks.
Risk mitigation measures in the cryptocurrency market
Many countries are increasingly interested in monitoring banks involved with cryptocurrency following the collapse of Silicon Valley Bank and Silvergate Bank in 2023. Both had customers related to cryptocurrency, with a significant portion of their portfolio coming from high-risk cryptocurrency investments. The UK government and regulatory bodies are considering new rules to limit banks’ investment processes and exposure to excessive cryptocurrency investment volumes.
The process of building a Basel framework on cryptocurrency risk
The Bank of England is expected to follow the Basel Committee's Institutional Framework on Banking Supervision, set to be implemented from early 2026 to enhance the risk assessment capabilities of cryptocurrency investments. Accordingly, it is anticipated that banks should allocate a maximum of 1% of their investment portfolio to cryptocurrencies like Bitcoin. This initiative aims to limit systemic risks while encouraging banks to build more appropriate risk provisions for investments directly connected to the cryptocurrency market.
The FCA's new regulatory policy on cryptocurrency
In the context of efforts to promote the development of the cryptocurrency market, the Financial Conduct Authority (FCA) of the UK is expected to lift the ban on selling ETNs to individual investors, provided they comply with strict legal conditions. Specifically, to be allowed to trade on FCA-approved exchanges, Tradeable Cryptocurrency Certificates (ETNs) must meet standards of transparency and safety.
Policy to expand access for retail investors
This decision marks a significant policy shift by the FCA, which previously banned individual investors from accessing cryptocurrency-based derivative products. From the FCA's perspective, this will contribute to economic development and enhance the competitiveness of the cryptocurrency industry in the UK. The Executive Director for Payments and Digital Finance at the FCA, David Geale, stated that this helps users have the option to choose high-risk investments, although such risks could lead to the total loss of the invested amount.
Overall, expanding access to investment tools like ETNs reflects the UK’s strategy to promote innovation and integration in the cryptocurrency market while maintaining appropriate controls to mitigate systemic risks. However, regulations concerning cryptocurrency-based derivative financial products will remain unchanged with restrictions for individual investors to protect the market and consumers from potential risks.
Source: https://tintucbitcoin.com/ngan-hang-anh-han-che-rui-ro-tien-dien-tu/
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