Cryptoassets: Regulation — [Christina Rees in the Chair]

Part of the debate – in Westminster Hall at 10:04 am on 7th September 2022.

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Photo of Alexander Stafford Alexander Stafford Conservative, Rother Valley 10:04 am, 7th September 2022

I agree that fraud is fraud, and that we must clamp down on it. We already have some regulation, but we are also in a new world. We need better and tighter regulation to deal with the issues that are coming forward. We should make sure that this Government pursue every single penny of fraud so that people get their money back.

Since the introduction of the FCA’s list of approved crypto firms, over 80% of applicants to join the list have not been accepted, and those firms were forced to shut down or move abroad. The FCA has worked quickly and effectively to install some form of regulation to ensure that the most important anti-money laundering and counter-terrorist financing checks are in place. The issue is that our system, and indeed our economy, has not yet caught up. The very nature of cryptocurrency necessitates that it can be securely used by anyone, anywhere, making it hard to successfully pass “know your customer” checks. Instead of relying on antiquated classifications, the Government must create new regulations for this ever-growing method of transactions, to nurture British businesses while protecting consumers and the public. The final proof of the ineffectiveness of current regulation and the need for action now is that 250 businesses are not on the approved crypto business list but still carry on crypto-related activities, whereas the list of approved, regulated firms has just 37 entities.

We have talked about the regulation of cryptocurrency, but I want to touch on one last point: the energy consumption. We need to look at not just financial regulations but, potentially, energy usage regulations. To take just one of the most popular cryptocurrencies, Bitcoin, according to the Bitcoin energy consumption index, the total Bitcoin carbon footprint last year was 71.73 million tonnes of CO2—the same as Greece. Bitcoin also uses the same amount of electrical energy as Norway. We are in an energy crisis across the world, and we must look at whether that is a good use of energy. If crypto is using so much energy, should there be regulation to ensure that it is mined or used using renewable sources? As we saw last year, China uses coal-fired power stations to help its crypto industry. We need to put in place regulations to make sure that our crypto is highly regulated not only financially, but so that it operates in a green and efficient way. There is no point going to a low-carbon future if we are undermining our own growth by having this energy-intensive industry.

To conclude, Britain cannot afford to ignore the potential benefits that cryptocurrency presents, but we must first level up regulation and education to ensure that we are properly prepared. We must protect consumers, investors and society but also unlock the economic benefits for the whole UK.