The Prudential Regulatory Authority (PRA), the bank regulator in the United Kingdom, will propose rules for issuing and holding digital assets, according to Vicky Saporta, executive director of the Prudential Policy Directorate at the Bank of England (BOE), in a speech on Feb. 27. The rules will be developed with Basel III rules and the Financial Services and Markets (FSM) bill currently being debated in Parliament in mind.
The FSM bill, which received its second reading in the House of Lords in January, would give the PRA the new secondary goal of facilitating the United Kingdom’s international economic growth.
“PRA rule-making can deliver three things,” Saporta said, “harnessing the UK’s strengths as a global financial center, maintaining trust in the UK as a place to do business, and tailoring regulations to UK circumstances.”
She went on to say: The BOE and PRA are collaborating with six other agencies to develop a “regulatory grid outlining our plans in one place,” according to Saporta. This new framework will replace the current “labyrinth” of regulations, many of which are European Union (EU) rules. The United Kingdom will leave the European Union in 2020.
Once the Basel 3.1 standards are finalized, the PRA will “consult on an implementation,” according to Saporta. Banks would be required to limit their exposure to cryptocurrencies to 1% of their total capital, with a 1.250% risk premium. Similar legislation is being considered by the EU. Saporta stated, “I also believe that it is usually easier for globally active firms to follow one global rulebook rather than incur the expense of adapting to a patchwork of local standards.”
Furthermore, the FSM intends to extend current BOE regulations for payment systems and e-money to stablecoins, and the PRA intends to “new standards for PRA-regulated firms will be coherent with rules for other sectors,” according to Saporta.