Regulators Aim to Balance Innovation and Stability in UK Crypto Sector
This strategy move comes after the FCA said that tokenisation and distributed ledger technologies could make fund management more efficient and support the innovation of the UK asset management sector.
In the press release by the FCA, Sarah Breeden, deputy governor for financial stability at the Bank of England, said, “The Bank and FCA have done a huge amount to enable the responsible adoption of tokenisation in retail and wholesale finance in the UK, working with the government and the industry.” She further added that, “the task now is for public and private sectors together to build on these strong foundations, moving from pilots to production to support financial stability and sustainable growth.”
The Prudential Regulation Authority (PRA) also issued updated guidance for bank CEOs, stating that traditional financial instruments and their counterparts, which are tokenised financial instruments, should get similar regulatory treatment when it comes to legal rights and risks. Hence, replacing the prior guidance, which was issued in 2022. Following the Basel Committee on Banking Supervision’s (BCBS) targeted review of banks’ crypto asset exposure standards, the PRA stated that this letter would act as temporary guidance until an expanded prudential framework is published.
Earlier in April, the FCA had asked for consultation on guidance for the country’s future crypto rules, which is expected to come into effect in October 2027. This proposed guidance supports the FCA’s goal for an open, sustainable, and competitive crypto market that is trustworthy for crypto users. The feedback window will be closing on June 3, 2026. The main objective of the FCA for this move is to have clarity over market participants, encourage effective competition, provide consumer protection, and have fair, transparent, orderly, and resilient markets.
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