The Bank of England Financial Policy Committee and other U.K. regulators are assessing crypto regulation after publishing reports on financial stability relating to cryptoassets and decentralized finance.

The BoE report was released on Thursday, and the Financial Conduct Authority, or FCA, along with the Bank’s Prudential Regulation Authority, or PRA, also released documents simultaneously that all reference one another.

The Bank’s committee, or FPC, stated in its 40-page report that cryptoassets and DeFi pose a “limited” risk to the stability of the UK financial system, but it saw that risk growing “as these assets become more interconnected with the wider financial system.” In response, the FPC promised to assess those risks and make recommendations.

The report found the existing regulatory framework sufficient for mitigating risks where crypto technology served the same purposes as traditional finance. The FPC “welcomed” the Treasury’s proposals for stablecoin regulation, including the proposal to bring the Bank into process, and it expressed support for international efforts to regulate DeFi applications.

The FPC advised financial institutions to “take an especially cautious and prudent approach to any adoption” of cryptoassets or DeFi until the regulatory framework is more robust. It was in that context that PRA Deputy Governor and CEO Sam Woods wrote a “Dear CEO” letter to banks, insurance companies, and designated investment firms on exposure to cryptoassets, explicitly referring back to the FPC report and the FCA notice.

The bulk of the…

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