The Bank of England (BoE) has announced plans to introduce new rules limiting banks’ exposure to cryptocurrencies by 2026, aiming to protect the country’s financial stability. These measures are expected to be among the most restrictive globally, reflecting the central bank’s caution regarding crypto’s volatile nature.
Bank of England Prioritizes Caution Over Risky Crypto Exposure
According to David Bailey, the executive director of prudential policy at the BoE, the new regulations will encourage financial institutions to adopt a conservative stance on crypto holdings. Bailey emphasized that since cryptoassets carry a high risk of complete capital loss, a restrictive regulatory framework is more appropriate—at least initially.
“Where investors could lose the entirety of their investment, starting at the restrictive end of the spectrum is appropriate,” Bailey stated during a speech in London.
Basel Standards to Shape UK Crypto Framework
The UK’s regulatory approach will be aligned with the Basel Committee on Banking Supervision’s global standards, which recommend strict oversight of crypto exposure in banking. Under the proposed rules:
- Banks’ exposure to volatile cryptoassets like Bitcoin should be limited to 1% of their core capital.
- The Basel framework must be implemented by January 2026, providing a timeline for the UK to finalize its rules.
Bailey confirmed that the BoE’s upcoming proposals will be “informed” by these international standards, ensuring consistency with other major financial jurisdictions.
Strengthening Financial Stability Post-2023 Bank Collapses
The 2023 failures of Silicon Valley Bank and Silvergate Bank, both of which were exposed to the crypto sector, have added urgency to these reforms. Regulators are becoming increasingly concerned about the systemic risks posed when traditional banks are too heavily involved in the crypto ecosystem.
The BoE’s initiative is part of a broader UK effort to manage crypto risks, particularly how they interact with the traditional financial system. The Financial Conduct Authority (FCA) is also preparing to implement a new regulatory regime for crypto firms in parallel.
Conclusion
The UK’s upcoming crypto regulations for banks represent a significant shift toward tighter oversight, especially compared to more crypto-friendly jurisdictions. By focusing on limiting exposure and promoting financial resilience, the UK aims to balance innovation with systemic safety.
As crypto continues to evolve, these policies signal that while the UK is open to digital asset innovation, it will not compromise its financial stability mandate. Banks operating in the UK should begin preparing for a conservative and compliance-heavy approach to crypto holdings ahead of 2026.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss