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Bank of England Set to Front-Run Regulations on Crypto



Bank of England Set to Front-Run Regulations on Crypto

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The Deputy Governor of the Bank of England has stated that they will front-run rules from the Basel Committee on capital backing of crypto assets. 

On Thursday, Deputy Governor Sam Woods announced that his country would be the first to accept global rules for banks and crypto-assets. This will prevent UK banks from getting large exposure to crypto assets without adequate capital support.

The rules Woods is referring to are those proposed by the Basel Committee on Banking Supervision. The committee recently began drafting regulations that could become the standard for large global banks. Additionally, these rules include disciplinary fees that may prohibit lenders from participating in the cryptocurrency space.

Under these rules, large banks that hold crypto-assets need sufficient capital support in proportion to the amount of crypto. The deputy governor described these rules as “very reasonable” and stated that banks do not have sufficient exposure to cryptocurrencies.

“We would not want to stop firms doing things that make commercial sense, but we would take a very conservative view on capital treatment, and if necessary, we would therefore front-run, maybe not exactly in the same way, but we would put some capital measures in place.”

Woods told Reuters.

Opposition to the Rules

While Woods himself is on board with the propositions out of Basel, some banks have a different opinion. Earlier this week, major lenders in the international financial scene sent a letter to the Committee in opposition to the potential rules. The opposition comes from the Global Financial Markets Association, which includes the likes of JP Morgan and Deutsche Bank. 

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At the moment, the deadline for the finalization of the rules is in January 2023.  However, Woods says it’s unclear if this deadline is possible since “timetables are shifting”. 

This is a slight change of tone from previous crypto-centric comments out of England. Over the summer, the Bank of England commented that cryptocurrencies only require monitoring and need no further action. As global regulators ponder sweeping crypto regulations, the space remains in limbo.

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