Part of Financial Services and Markets Bill – in a Public Bill Committee at 11:30 am on 27 October 2022.
Tulip Siddiq
Shadow Minister (Treasury)
11:30,
27 October 2022
It is a pleasure to see the Minister still in his place. I speak to clauses 21 and 22 and schedule 6 together.
Properly regulated innovations that have emerged in the crypto space, such as distributed ledger technology, have the potential to transform our economy and the financial services sector. As the Minister will know, many innovative companies are embracing different forms of blockchain to improve transparency in finance and create high-skilled, high-productivity jobs across the UK. However, I draw his attention to the recent collapse in the value of cryptoassets, including several stablecoins, which has put millions of pounds of UK consumer savings at risk. I am sure he is aware that the crypto trading platform Gemini estimated that as many as one in five people in the UK could have lost money in the crash. Do the Government agree with Gemini’s estimate? If so, does the Minister agree that the recent crisis in crypto markets demonstrates that so-called stablecoins are not necessarily stable, and that their instability can pose a significant risk to the public? How did the recent collapse in the value of cryptocurrencies inform the Treasury’s approach to clauses 21 and 22?
The Opposition have yet to be convinced that Ministers have acknowledged the scale of the threat that cryptoassets can pose to consumers and our constituents. In our Public Bill Committee evidence session, Adam Jackson of Innovate Finance, which is the trade body for UK fintech businesses, pointed out that the Bill has failed to set out how regulated stablecoins will interact with a future central bank digital currency. Can the Minister shed some light on that interaction? I also hope he can explain why the Government have opted to bring only stablecoins within the regulation. I am sure he is aware that the EU has just agreed to a comprehensive regime for regulating crypto exchanges and cryptoassets more broadly, and Joe Biden has said that he is looking to do something similar, but the UK will not even be consulting on a comprehensive regime until later this year. Does the Minister agree that this risks leaving our country behind in the fintech and blockchain race?
Even more importantly, does the Minister agree that in the absence of a comprehensive regulatory regime, the UK risks becoming a centre for illicit finance and crypto activity? I looked at the analysis from Chainalysis—a global leader in blockchain research—which pointed out that cryptocurrency-based crime, such as terrorist financing, money laundering, fraud and scams, hit an all-time high in 2021, with illicit finance in the UK estimated to be worth more than £500 million. In the absence of a comprehensive regulatory regime, how do the Government think they are going to protect our consumers from such threats?
Will the Minister shed a bit more light on his strategy? Does he believe that the definition of “digital settlement assets” in clauses 21 and 22 is broad enough for regulations on a wide range of cryptocurrencies, other cryptoassets and crypto exchanges? Finally, on pacing this work, I want to know his intention. How long will the public and the fintech sector have to wait until the regulators are given the power that they need to regulate the types of cryptoassets that I have referred to?
A parliamentary bill is divided into sections called clauses.
Printed in the margin next to each clause is a brief explanatory `side-note' giving details of what the effect of the clause will be.
During the committee stage of a bill, MPs examine these clauses in detail and may introduce new clauses of their own or table amendments to the existing clauses.
When a bill becomes an Act of Parliament, clauses become known as sections.
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