UK PRA Dear CEO letter on prudential treatment of cryptoasset exposures

The UK Prudential Regulation Authority (PRA) has issued a Dear CEO letter setting out updated expectations on the prudential treatment of tokenised assets, stablecoins and other cryptoasset exposures. This replaces the 2022 guidance which set out interim expectations when cryptoasset markets were less developed and international standards were still under development.

The PRA reaffirms that firms should apply the full prudential framework to cryptoasset exposures, including the Fundamental Rules, Pillar 1 and Pillar 2 requirements, and the Internal Capital Adequacy Assessment Process. It emphasises the need to maintain strong governance and risk management, including by carefully assessing whether the characteristics of these assets are sufficiently captured within existing frameworks.

It confirms that a conservative capital treatment remains appropriate for most cryptoassets, including a 100% capital requirement for unbacked cryptoassets, while recognising that certain newer forms of cryptoassets may warrant a more risk-sensitive approach. The PRA also clarifies that tokenised traditional assets should generally receive the same prudential treatment as their non-tokenised equivalents where legal rights and underlying risks are comparable, in line with a "same risk, same regulatory outcome" principle.

The PRA states that while its existing rules remain the primary source of requirements, the Basel Committee on Banking Supervision (BCBS) international standard (which is currently subject to a targeted review in respect of cryptoasset exposure) can provide a helpful steer for firms seeking to apply an appropriate and proportionate approach. The expectations in the letter are intended to remain interim until the PRA publishes its proposed future prudential framework, which it will consult on in 2028 at the earliest, and following the completion of the BCBS targeted review.

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