Adam Jackson:

Taking your first question, it is worth looking at the EU MiCA regulation and possibly the approach of a territory such as Singapore. It links a bit to the investment. We did some analysis of investment in just crypto alone, looking at that as a vertical within fintech, and again, the UK has always been the second location for crypto investment in the world, after the US, until the first half of this year, when we fell behind to Singapore. That might be a blip, but when you then look at regulatory mapping, you will see that Singapore possibly has the most forward regulatory system, particularly for stablecoin. The EU has a very comprehensive approach, but is has not come into force yet. Singapore has an established system, so I think that shows that if you get it right and have a proportionate regime, you attract the industry and the investment.

Is the EU approach right? There are strong arguments to say that it is possibly too comprehensive, and we come back to the notion that trying to find something that works for all 27 does not fit our circumstances. The UK is right to take a more iterative approach. We obviously have a common law approach as well, which means there are certain things we can do through case law. It is absolutely right that we are focusing on stablecoin and that is where some of the biggest volatility in the market was this year. The Bill addresses that, which will be really important in providing confidence for consumers and, critically, for investors in technology firms in that space.

The EU rule applies to not just stablecoin but cryptocurrencies more generally and exchanges, so should we also have a regulatory regime for other cryptoassets? I think the answer is yes. The question is how it fits within the Bill. The Government have said that they will introduce proposals for wider regulation of other cryptoassets. We expect something at some point, possibly soon.

That begs the question whether the Bill already enables the introduction of regulations. We probably need to ask Treasury counsel about the definition of a digital settlement asset. The Bill allows for the definition to be changed. Do the rules enable it to cover other cryptoassets? If it does, the powers are there to enable regulators to introduce systems subject to the proposals. If not, will we have to wait another 20 years before regulators are given the powers to regulate cryptoassets?

On cryptoassets, the important things that our members, including exchanges and cryptoasset firms, emphasise are an authorisations regime, a set of rules for initial coin offering—essentially, clear guidance on what information should be provided to consumers about individual assets—and custody. The Bill provides for applying rules on custody for stablecoin. If we do not have a parallel system, we will start to see some question marks over why those custody rules do not apply to cryptoassets as well.

On investment, there are different ways of looking at the figures from the first half of this year. Some investment, particularly VC, has really held up, but we know that globally we can expect a fall in investment, and we are just starting to see that trickle through. It is therefore a question of how the UK holds up against other countries. We might even see more mergers and acquisitions. At the moment, the pound makes the UK a nice place to come to buy fintech firms, so there may be a bit of difference there. It comes back to maintaining that competitiveness. Our members tell us that the most important thing is to get the Bill through. It provides important powers. If we can strengthen it in some of the areas that I mentioned to the Minister, that is also critical.

The other thing that I would flag is that there are two other pieces of legislation that are either before the House or slightly in limbo. They are also important for the competitiveness of fintech. One is the Data Protection and Digital Information Bill, introducing digital ID and open data, which will really transform the open banking we have into open finance. Australia already has that, so there is a risk of us falling behind. That Bill is also really important.

We have heard a lot about fraud. The provisions in the Online Safety Bill around making the places where frauds are advertised—the social media platforms and search engines—responsible for fraud, as well as requiring banks to reimburse, are critical. That is starting to be a factor in investment decisions. Whatever happens to that Bill, ensuring that those provisions are introduced as soon as possible is key.