UK Tightens the Screws: Banks Must Slash Crypto Exposure by 2026 – The Real Motive

The UK financial watchdog is cracking down—hard. New mandates demand banks reduce crypto holdings by next year, citing 'systemic risk.' But is this really about stability—or old-school finance clinging to control?

Behind the regulatory curtain: Whitehall's move coincides with booming institutional crypto adoption elsewhere. Coincidence? The City's traditional players certainly hope so.

Risk or rivalry? While regulators wave the consumer protection flag, skeptics note the timing—just as crypto ETFs start eating into traditional asset management fees. How very... convenient.

The compliance clock is ticking. Firms face strict capital requirements on digital assets by Q1 2026. Expect creative accounting worthy of a London hedge fund to 'technically' comply while maintaining exposure.

Final thought: Nothing protects legacy profits quite like regulation dressed as protectionism. The more things change in finance...

UK Rules to be ‘Informed’ by Basel Committee Standards

Besides, the UK is working to enact the Basel Committee on Banking Supervision’s disclosure framework for crypto exposure. This includes “standardized set of public tables and templates covering banks’ crypto exposures.”

The Basel Committee originally indicated crypto disclosures to arrive by January 2025; however, it extended the deadline by another year.

Further, the Basel Committee recommended that banks allow only 1% of their investments in cryptocurrencies like Bitcoin.

FCA Set to Implement New Crypto Regime

The UK’s Financial Conduct Authority (FCA) has been pushing to establish a clear framework for cryptoasset firms in the country. The regulator’s “gateway regime” is earmarked for 2026, which will act as a new authorization for crypto companies.

The regulator is also looking to finalize its regulatory framework for stablecoins and crypto custody. The FCA is currently seeking public input on its stablecoin regulation plan.

The restrictions on banks’ crypto exposure come at a time when European banks are increasingly involved in crypto. Though the EU watchdog, ESMA, noted that 95% of EU banks do not engage in crypto activities, banks like BBVA have gone ahead in advising wealthy customers to invest in crypto.