The Bank of England is poised to roll out new restrictions on banks’ interactions with cryptocurrencies, targeting 2026 for implementation. This move, announced by David Bailey, the executive director of prudential policy at the Bank of England, during his address at the Risk Live Europe conference in London, is aimed at safeguarding financial stability amidst the volatile crypto landscape.
Tightening the Reins on Crypto Exposure
The proposed regulations appear to lean heavily towards a more conservative approach, with Bailey emphasizing caution in the face of crypto’s notorious price swings. “There are also examples where it might be more appropriate to start more towards the restrictive end of the spectrum,” Bailey noted, highlighting the need to gather evidence before considering any relaxation of standards. The focus is on cryptoassets that exhibit high volatility and the potential for investors to incur total losses. As explored in our recent coverage of the UK FCA’s proposal to lift the ban on crypto ETNs for retail investors, the regulatory environment in the UK is actively evolving to address both risks and opportunities in the crypto market.
The U.K.’s plan is to align with the Basel Committee on Banking Supervision’s guidelines, which advocate for a cap on banks’ exposure to crypto, such as Bitcoin, at 1%. This framework, expected to be fully operational by 2026, aims to equip nations with a robust mechanism to assess and mitigate risks associated with cryptocurrencies.
A Response to Past Financial Shocks
This initiative is not happening in a vacuum. The aftermath of the 2023 collapses of Silicon Valley Bank and Silvergate Bank, both of which had significant crypto ties, has spurred regulators to scrutinize the entanglement of traditional financial institutions with digital assets. By keeping a tight lid on banks’ crypto dealings, regulators hope to fortify the financial system against similar shocks.
Moreover, these prudential rules coincide with the Financial Conduct Authority’s plans to introduce a new regulatory regime for crypto firms, signaling a coordinated effort to bring more oversight to this burgeoning sector. The U.K.’s regulatory landscape is clearly evolving, reflecting a growing recognition of the need to balance innovation with stability. For a deeper dive into the regulatory implications, see our coverage of the Crypto Market Structure Bill moving out of House Committees.
Looking Ahead: What It Means for the Crypto Market
As the clock ticks towards 2026, the implications of these restrictions for the crypto market remain a topic of intense debate. On one hand, some analysts argue that stringent regulations could stifle innovation and limit the growth potential of crypto-related businesses in the U.K. On the other hand, there are voices asserting that such measures are necessary to prevent systemic risks and protect consumers.
The interplay between regulation and innovation is delicate. While the Bank of England’s cautious stance might seem prudent, it raises questions about how the country will maintain its competitive edge in the rapidly evolving global crypto market. Will these rules deter banks from engaging with crypto altogether, or could they offer a clearer framework that encourages responsible participation?
As we edge closer to 2026, one thing is certain: the dialogue between regulators and the crypto industry will continue to shape the future of finance in the U.K. and beyond. Whether these measures will ultimately foster a safer, more robust financial ecosystem or inadvertently hold back a transformative technology is a question that only time—and perhaps a few more regulatory tweaks—will answer.
Source
This article is based on: UK to Propose Restrictions on How Banks Can Deal With Crypto Next Year
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
