PRA tells banks how to treat tokenised assets, stablecoins

The UK’s Prudential Regulation Authority told banks and designated investment firms in a Dear CEO letter published on 18 May how it expects them to treat tokenised assets, stablecoins and other cryptoasset exposures. The regulator said tokenised traditional assets should generally receive the same prudential treatment as their non-tokenised equivalents, while the vast majority of unbacked cryptoassets still carry a 100 per cent capital requirement.

For lenders weighing tokenised-asset or stablecoin activity, the message was not easier treatment but clearer classification. Firms need to show where those exposures sit, how they are classified and why the capital treatment matches the underlying economics. The letter also replaces the PRA’s 2022 Dear CEO note and gives banks an interim guide while a fuller prudential framework is not expected before 2028.

That removes some of the ambiguity.

The letter arrived as the Bank of England and Financial Conduct Authority set out a shared vision for tokenisation in UK wholesale markets. That statement struck a pro-innovation tone, but it also tied tokenisation to resilience and control rather than crypto boosterism. Simon Walls of the FCA said in the joint statement:

“Tokenisation has the potential to transform wholesale markets — reshaping how assets are issued, traded and settled.”

• Simon Walls, FCA

The PRA letter supplies the supervisory side of that agenda. It shows that officials want the efficiency case for tokenisation tested inside familiar capital and governance disciplines, not outside them. The question is shifting from whether digital assets belong in regulated finance at all to how regulated firms should absorb the risks when they do.

What banks need to show

In practice, the letter means firms cannot assume a token changes the prudential answer just because the wrapper is new. A tokenised version of a traditional asset should be assessed on the substance of the underlying exposure, according to the PRA’s letter on tokenised assets, stablecoins and other cryptoasset exposures. The same document says supervisors still want explicit treatment for stablecoin and crypto positions, rather than broad analogies or informal workarounds.

For compliance and treasury teams, that work falls into familiar territory. Firms have to document whether a tokenised exposure is economically the same as the asset beneath it, whether a stablecoin position creates separate risk and where any capital charge should sit. Tokenisation may change the settlement layer, but the PRA is signalling that it does not automatically soften the prudential judgement.

The timing matters too. The UK’s crypto debate has often centred on market access, stablecoin rules or wholesale-market pilots. This letter pulls the issue back to bank boards, capital planners and supervisors, making crypto exposure a mainstream risk-management problem. For institutions that want to expand in tokenised finance before 2028, that raises the reporting burden well before a final regime is written.

Sarah Breeden, the Bank of England’s deputy governor for financial stability, described the wider push in similar terms in the joint Bank of England and FCA statement:

“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.”

• Sarah Breeden, Bank of England

Taken together, the messages from Threadneedle Street are straightforward. The wider wholesale-market agenda invites firms to move beyond pilots, while the prudential arm says any expansion will still face familiar scrutiny of capital, governance and financial-stability risks. Banks that want stablecoin or tokenised-asset exposure will have to explain it in the language supervisors already use.