Good morning, Dame Maria. It is a pleasure to serve under your chairmanship once again. I thank all hon. Members who are with us again today.

The Government believe that certain cryptoassets and distributed ledger technology could drive transformational changes in financial markets, offering consumers new ways to transact and invest, and that such technology could pose risks to consumers and financial stability. The Bill therefore allows the Government to bring digital settlement assets inside the regulatory perimeter.

In the first instance, the Government are focusing on fiat currency-backed stablecoins used primarily for payment. These are a type of digital settlement asset that could develop into a widespread means of payment and potentially deliver efficiencies in payments. Clause 21 extends the scope of payment systems legislation so that digital settlement asset payment systems and service providers are subject to regulation by the Bank of England and the Payment Systems Regulator.

Today, the Bank of England regulates systemic payment systems and service providers to those systems, where the Treasury makes an order recognising a particular payment system. That is subject to a high bar. Among other criteria, the Treasury must be satisfied that a system’s potential failure may cause disruption to the stability of the financial system.

Clause 21 also extends the scope of the Financial Services (Banking Reform) Act 2013 to ensure that relevant digital settlement asset payment systems are subject to regulation by the Payment Systems Regulator. That will help to protect user interests, promote competition and encourage innovation.

The changes made by clause 21 and schedule 6 will ensure that digital settlement asset payment systems and service providers are regulated to the same high standards as traditional payment systems.

Clause 22 allows the Government to bring digital settlement assets into the UK regulatory perimeter where they are used for payments. Secondary legislation under this clause could give the regulators powers over payment systems and service providers in order to mitigate conduct, prudential and market integrity risks. It could also allow the regulators to place requirements on firms in relation to appropriate backing assets and capital requirements to manage potential stability risks.

Given the nascent and rapidly evolving nature of the cryptoasset market, these provisions give the Treasury powers to amend the definition of “digital settlement asset” through secondary legislation. That is necessary to ensure that regulation can keep pace with the fast-moving nature of the market. The affirmative procedure will apply to any statutory instrument that seeks to amend the definition.

Clause 22 will also allow the Government to apply existing administration or insolvency regimes to digital settlement asset systemic payment systems and service providers to manage potential failures. The clause therefore provides the Government with the necessary powers to ensure that our legislative approach to digital settlement assets is flexible and responsive, and fosters competition and innovation in this fast-evolving sector. I recommend that the clauses and schedule stand part of the Bill.