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Recent released reports, notices and letters from regulatory authorities outlined the crypto regulation concerns and their assessment approaches
Crypto Regulations are getting serious concerns over time, as its need is getting necessary with the growing demand and rapid acceptance of digital assets all around. Stepping further towards doing the same, financial authorities in the UK, including the Financial Policy Committee of the Bank of England and several other UK regulators, are assessing regulations regarding crypto. Efforts came in front after authorities had released publishing financial stability reports related to decentralized finance and cryptocurrencies.
On Thursday, the Bank of England released a report and the Financial Conduct Authority, and Prudential Regulation Authority of the Bank released several documents in series. All those documents and reports are interlinked as they have references.
In its 40 page long reports, the Bank’s Financial Policy Committee mentioned the risks related to crypto-assets and DeFi. The report stated that both DeFi and crypto assets pose only a limited risk to the financial system stability of the UK. However, the report mentioned that the risk is growing in upcoming times as the assets become more and more interconnected with the traditional financial system more broadly. Clarifying its stance and activity on the situation, FPC promised to make recommendations and assess the risks.
Further, the report also found that the existing regulatory framework that keeps control of traditional finance is sufficient to mitigate the present risks. Currently, crypto technology is serving the same purposes as TradFi.
Apart from this, FPC also welcomed the proposal of the UK Treasury for stablecoin regulation that also included the proposal to keep the Bank in the process and showcased the support for international efforts for DeFi application regulations.
The letter encouraged financial institutions to be more cautious and take a prudent approach for any crypto assets or DeFi adoption until the framework of regulations gets more robust. Those were in the context of the ‘Dear CEO’ letter that Deputy Governor at Prudential Regulation Authority (PRA) and CEO Sam Woods wrote to insurance companies, banks and alike designated investment firms having crypto exposure which referred to the FPC report and notice of FCA.
Major details of the letter were having the recalling for the addresses about the existing regulatory frameworks and policies as the growing interest towards crypto. In the letter, Woods also asked institutions for a survey completed on the existing crypto exposure of organizations and further plans for the year by June.
The FCA reminded the firms in its notice about their current obligations during interactions with crypto and related services. For instance, to be clear while interacting with customers and make it clear for them about regulations and risks involved in digital assets and their prudential and custody considerations.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
