Cryptoassets: Regulation — [Christina Rees in the Chair]

Part of the debate – in Westminster Hall at 10:12 am on 7th September 2022.

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Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health) 10:12 am, 7th September 2022

That is a question I cannot answer. I think that there are those who are prepared to take a gamble and those who are not. Perhaps people in Northern Ireland like the element of uncertainty, or perhaps investors like the certainty of the value of their investment. I will give an example of that, because it illustrates the situation very well.

Some 38% of people in Northern Ireland say that they have thought about purchasing cryptocurrency but have not yet done so. What some forget is that Bitcoin is a form of finance. Some bars and restaurants across the UK accept it as a form of payment, so it must be regulated. What I am seeking to do today, as someone who does not have any real knowledge of how the system works, and what I always look to do, is to consider how we can do things better and how we can regulate crypto and make it safe.

We have heard many stories of how accessible and worthwhile Bitcoin and cryptocurrency can be. I know Dr Cameron has a great interest and knowledge in this subject matter. One of my constituents, who is only 28, invested £1,000 in Bitcoin when he was 23. The value of that today is £40,000. What an investment that young fella made! It was probably not a big amount for him, but at the same time he took the gamble. Knowing when to stop is one thing, but continuing the gamble and risk will not always work out well for everyone. People are making extortionate amounts, but it is important that the dangers and risks of addiction are highlighted. Those are some of the concerns I have on safety, and that is where regulation from the Government and the Minister would be most noticed.

Many have heard the story—I wonder how it could ever have happened—that in 2013 a British man accidentally threw away a laptop hard drive that contained what would be worth £280 million today, so cryptocurrency can be incredibly volatile and has been described as overhyped. The Bank of England has strongly highlighted the consumer risks of cryptocurrency and has tended to downplay the threat they may cause. In addition, the FCA has regulated some cryptocurrencies, which tend to function like shares or investments.

It is essential that cryptocurrency assets follow anti-money laundering guidelines. However, there is a link between cryptocurrencies and organised crime. Not every investor is involved in that, but clearly there is a link. In 2021, the National Crime Agency seized £27 million in cryptocurrency assets. The lack of regular oversight of cryptocurrency makes it attractive for criminals seeking to partake in illicit financial crime, not only in the UK, but all over the world. In addition, the largest seizure of that kind in the UK was undertaken by the Met police, when they seized £180 million-worth of cryptocurrency linked to international money laundering in London. That underlines the importance of regulation, and being able to follow the money and catch illegal money.

Although crypto can seem appealing to many, and a hobby for some to build their assets, the potential dangers must be brought to light. Government and FCA regulation is crucial to ensure that people are aware of what they could lose. There is always a risk with crypto, but it is about ensuring that people know the risks. The cryptocurrency market crashed twice—we, and investors, must be reminded of that—in 2018 and 2020, losing large sums of money for hundreds of people.

The Government have some regulations in place to address cryptoassets, but this debate is about doing that better. The hon. Member for West Dunbartonshire put that forward, as others have, in a concise and helpful way. I look to the Minister to share the Government’s thoughts about how that can happen. Finance is an essential component of our economy and one that needs rules, regulations and laws in place. We must get this right and protect people from economic crime, which is all too prevalent.

I am aware that this issue will be referenced in the upcoming Financial Services and Markets Bill, and maybe the regulations could be strengthened to offer us some reassurance. We must look UK-wide when addressing the issue. It is not just an England issue, but a Scotland, Wales and Northern Ireland issue; it is for all of us together. I urge the FCA and Her Majesty’s Treasury to engage with local Administrations in Scotland, Wales and Northern Ireland to ensure the regulations are knitted together administratively in all regions, and to ascertain what more the House and the Minister can do to regulate the use of cryptoassets and currencies. Again, I thank the hon. Member for West Dunbartonshire for securing this important debate. I very much look forward to what the Minister has to say.