Crypto
Reading Time: 2 minutes
- The Bank of England has announced plans to cap how much crypto banks can hold on their balance sheets
- Officials have aligned the proposals with global Basel standards, including a 1% exposure cap for risky digital assets
- Regulators have confirmed the full rules and required disclosures will take effect by early 2026
The Bank of England has outlined new rules that will limit how much crypto banks and investment firms can hold in an effort to tighten oversight of the financial sector’s exposure to digital assets. The proposals mirror the framework set out by the Basel Committee and aim to reduce risk by capping crypto exposure at just 1% of a bank’s Tier 1 capital. While the final version of the rules won’t arrive until 2026, U.K. regulators say the country is now firmly on a path to integrating crypto into mainstream financial oversight.
Crypto Bank of England Warns Against Overexposure
The move was announced this week by David Bailey, the Bank of England’s director for prudential policy, who was speaking at the Risk Live Europe conference. Bailey told the audience that it would be “more appropriate to start more towards the restrictive end of the spectrum” when it comes to regulating banks’ crypto holdings, emphasizing the potential for “large swings in valuation” and the risk that investors could “lose the entirety of their investment.” Bailey also made clear that banks should tread cautiously as regulators work to understand the evolving risks posed by digital assets.
The new rules are built around international guidelines set by the Basel Committee, which has called for strict caps and standardized disclosures when banks deal with unbacked cryptoassets like Bitcoin. These rules classify such assets as high-risk and subject to a 1,250% risk weighting, effectively discouraging banks from holding them at scale. The U.K. intends to fully implement this framework by 2026, which will require banks and investment firms to disclose their crypto exposures using a common reporting template.
Crypto A Coordinated Approach to Crypto Regulation
The Bank of England’s announcement fits into a wider government effort to bring crypto within the regulatory perimeter, with HM Treasury and the Financial Conduct Authority (FCA) both advancing their own proposals on stablecoin issuance, custody, and conduct rules. Although the new prudential rules are strict, Bailey left the door
