This marks a shift from the regulator’s earlier position, which barred retail investors from accessing the financial product. While the Financial Conduct Authority (FCA) approved crypto ETNs for professional traders last year, it maintained a ban for retail investors, arguing that the products were “ill-suited” and posed significant risks of harm.
The Bank of England wants banks to have less exposure to crypto by 2026
Source Cryptopolitan
The Bank of England plans to introduce new proposals on banks’ exposure to crypto assets by 2026 to safeguard financial stability.
During the Risk Live Europe event in London, David Bailey, an Executive Director of Prudential Policy at the Bank of England, stated that the UK aims to implement more stringent regulations.
Bailey indicated that banks will likely be encouraged to keep their crypto exposure low.
The UK takes precautions to address financial instability in crypto-related banks
Many nations have been trying to address financial instability resulting from crypto volatility by examining how connected their banks are to cryptocurrency. This particularly follows the 2023 collapse of Silicon Valley Bank and Silvergate Bank, which had significant crypto-related clients.
Addressing the Bank of England’s upcoming proposals on crypto exposure, David Bailey said it can be prudent to begin with stricter regulations while gathering data to determine whether those rules could be eased over time.
He noted one example of this issue: how banks handled their investments in crypto assets, particularly ones with high price swings and where investors could lose everything.
It is worth noting that the UK is trying to enact the Basel Committee on Banking Supervision’s disclosure framework for banks’ exposure to crypto.
The committee said the framework should be in place by the beginning of 2026 to allow nations to assess risks. Additionally, the Basel Committee recommended that banks allow only 1% of their investments in cryptocurrencies like Bitcoin.
Bailey stated that the UK would base its plans on the guidelines the Basel Committee had created.
Meanwhile, the UK’s prudential crypto regulations will come as the country’s other financial watchdog — the Financial Conduct Authority — will soon roll out a new regulation for crypto.
FCA lifts ban on retail investors’ access to ETNs
The UK is changing its stance on crypto as the government looks to boost the economy and back the digital assets sector.
In April, Britain released a draft of laws to regulate cryptocurrencies for the first time. This matched the United States’ strategy instead of following the European Union’s tailored rules for the industry.
Earlier, Britain’s financial regulator revealed plans to lift a ban on consumers buying crypto Exchange Traded Notes (ETNs) but under certain legal conditions.
Notably, to be available to individual consumers, the ETNs must be traded on an investment exchange approved by the FCA, according to the regulator.
The FCA gave a reason for this sudden shift in policy. According to a regulatory body, allowing retail investors to buy ETNs would help economic growth and competitiveness.
David Geale, Executive Director for Payments and Digital Finance at the FCA, said the regulator is rethinking its approach to risk.
According to Geale, lifting the ban would let people decide if a high-risk investment suits them, even if it means they could lose all their money. He addressed this as they opened up room for feedback on the proposal.
Still, the watchdog noted that the ban on retail investors trading cryptoasset derivatives will remain.
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