The Prudential Regulatory Authority (PRA) which is United Kingdom’s bank regulator plans to propose rules for issuing and holding digital assets. This proposal aims to facilitate international economic growth under the present bill called the “ Financial Services and Market” bill which is now in Parliament. Thus, these rules will be developed in consideration of Basel III rules and Financial Services and Markets (FSM).
The FSM bill which underwent its second reading in the House of Lords in January will make PRA the new secondary objective for boosting UK’s international economic growth. The PRA rules further aim to deliver three solutions –
- Harnessing the country’s strength as a global financial center.
- Maintaining trust in the UK as a business hub.
- Tailoring the regulations for circumstances in the UK.
Besides this, it aims to propose rules for issuing and holding digital assets.
Presently, BOE and PRA are working together with six other agencies for defining a regulatory grid for setting out the rules. This new framework is expected to replace the “labyrinth” of regulations in the country most of which are European Union (EU) rules.
The PRA also plans to consult on the implementation of Basel III standards once they are finalized. After the finalization of Basel III the new standards would call for banks to restrict their exposure to digital currencies to 1% of capital with around a 1,250% risk premium. Alongside this, FSM plans to extend their current BOE regulations for payment systems and e-money to stablecoins. It is also reported that PRA sees that these new standards for PRA-regulated firms will be coherent with the rules of other sectors in the economy.
