Bank of England Cracks Down: Banks Must Slash Crypto Exposure by 2026

The Old Lady of Threadneedle Street just drew a line in the sand—and it's blockchain-shaped. By 2026, UK banks face strict new limits on cryptocurrency holdings, forcing a $2 trillion industry to choose between tradition and disruption.

The Regulatory Hammer Drops

No more dipping toes in the DeFi pool. The BoE's mandate gives institutions just 12 months to unwind speculative positions—a move that'll send compliance officers scrambling faster than a Bitcoin flash crash.

Bankers vs. Blockchain

While fintech startups laugh all the way to their cold storage wallets, legacy lenders must now explain to shareholders why their 'cautious crypto strategies' suddenly require nine-figure write-downs. (Bonus jab: Nothing unites bankers like the smell of fresh regulation—except maybe bonus season.)

The countdown begins: 547 days until London's financial dinosaurs either evolve...or get left in the blockchain dust.

The UK takes precautions to address financial instability in crypto-related banks 

Many nations have been trying to address financial instability resulting from crypto volatility by examining how connected their banks are to cryptocurrency. This particularly follows the 2023 collapse of Silicon Valley Bank and Silvergate Bank, which had significant crypto-related clients.

Addressing the Bank of England’s upcoming proposals on crypto exposure, David Bailey said it can be prudent to begin with stricter regulations while gathering data to determine whether those rules could be eased over time.

He noted one example of this issue: how banks handled their investments in crypto assets, particularly ones with high price swings and where investors could lose everything.

It is worth noting that the UK is trying to enact the Basel Committee on Banking Supervision’s disclosure framework for banks’ exposure to crypto.

The committee said the framework should be in place by the beginning of 2026 to allow nations to assess risks. Additionally, the Basel Committee recommended that banks allow only 1% of their investments in cryptocurrencies like Bitcoin. 

Bailey stated that the UK WOULD base its plans on the guidelines the Basel Committee had created.

Meanwhile, the UK’s prudential crypto regulations will come as the country’s other financial watchdog — the Financial Conduct Authority — will soon roll out a new regulation for crypto.

FCA lifts ban on retail investors’ access to ETNs 

The UK is changing its stance on crypto as the government looks to boost the economy and back the digital assets sector. 

In April, Britain released a draft of laws to regulate cryptocurrencies for the first time. This matched the United States’ strategy instead of following the European Union’s tailored rules for the industry. 

Earlier, Britain’s financial regulator revealed plans to lift a ban on consumers buying crypto exchange Traded Notes (ETNs) but under certain legal conditions.

Notably, to be available to individual consumers, the ETNs must be traded on an investment exchange approved by the FCA, according to the regulator. 

This marks a shift from the regulator’s earlier position, which barred retail investors from accessing the financial product. While the Financial Conduct Authority (FCA) approved crypto ETNs for professional traders last year, it maintained a ban for retail investors, arguing that the products were “ill-suited” and posed significant risks of harm.

The FCA gave a reason for this sudden shift in policy. According to a regulatory body, allowing retail investors to buy ETNs would help economic growth and competitiveness.

David Geale, Executive Director for Payments and Digital Finance at the FCA, said the regulator is rethinking its approach to risk.

According to Geale, lifting the ban would let people decide if a high-risk investment suits them, even if it means they could lose all their money. He addressed this as they opened up room for feedback on the proposal.

Still, the watchdog noted that the ban on retail investors trading cryptoasset derivatives will remain. 

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