Cryptoassets: Regulation — [Christina Rees in the Chair]

Part of the debate – in Westminster Hall at 10:19 am on 7th September 2022.

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Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe), Shadow SNP Deputy Spokesperson (Treasury - Chief Secretary) 10:19 am, 7th September 2022

Thank you, Ms Rees, on behalf of all of us for saving this morning’s debate. It would have been a great pity if all the work that some hon. Members had put into their speeches had gone to waste. I thank my good and hon. Friend Martin Docherty-Hughes for leading the debate in such a well-informed way. From conversations I have had with him, I know that although he definitely sees the huge potential benefits of cryptocurrency, he is also all too well aware of the potential pitfalls.

My hon. Friend gave us a helpful history of cryptocurrency and, importantly, reminded us that it has a particular culture that some of us might be interested in. We have to recognise that there may be certain attitudes to risk in that culture; I think he used the phrase “have fun staying poor”. If people involved in those games—and they are games for too many people—are happy to stay poor or run the risk of being poor, that is all very well. However, many people are sucked in without understanding the risk that they might suffer significant financial losses.

My hon. Friend repeatedly referred to the crypto bubble, which is an accurate description. The one thing all bubbles have in common is that they burst; we have to ensure that regulations are brought in quickly enough to stop it being a bubble before it bursts. He also pointed to flaws in the way the Financial Conduct Authority operates, on which I agree with him wholeheartedly. He referred to the collapse of Terra, whose total value went from something like $45 billion to nil in approximately 72 hours. That is how quickly things can go either well or very badly in the world of crypto.

Alexander Stafford made an interesting speech. He was correct in describing Britain as the beating heart of financial services, or words to that effect; financial services are a massive part of the economy of London and the whole United Kingdom. However, I would caution him that we must recognise the fact that, although some people are in denial, Britain—London in particular—is gaining a reputation as one of the best places in the world to commit financial services fraud. If we continue to deny that and think of it as a problem that will go away, the entire future of London as a financial services centre of excellence could be in doubt.

Towards the end of his speech, the hon. Member for Rother Valley made a strange comment in response to the reminders of my hon. Friend the Member for West Dunbartonshire about the huge energy input required for crypto to operate. The hon. Gentleman said that there is no point going for a low-carbon future if that undermines our economic growth. I gently point out to him that there is no future that is not low carbon. If we do not achieve a low-carbon future, we have no future whatsoever.

Jim Shannon, who I hope I can refer to as a friend, admitted to being one of the 85% who do not own cryptocurrency. It is nice to see that he is still very much in the majority with regard to some things in Northern Ireland, although he might find that that becomes a minority at some time—who knows! We could have an interesting philosophical discussion over his wee story about the young man who made so much money on crypto, increasing £1,000 to £40,000. That is slightly more modest than others who have made gains on crypto. Where did that £39,000 come from? The world did not become £39,000 richer. The amount of money in the world did not increase by that amount during that time, so somebody somewhere was £39,000 worse off, or a lot of people were a few pounds worse off. Every time somebody makes money on a speculative investment, somebody somewhere else loses it. We have to be prepared to face up to that.

I hope the Government will take the same approach I do: clearly, cryptoassets and currencies are here to stay. We cannot uninvent them. The nature of the thing is that even if we wanted to, it would be practically impossible to legislate to keep them out of the United Kingdom all together. People we are responsible for will continue to get involved in crypto. They will invest in it, play the game and speculate on it; whatever terminology we use, they are going to put their money into crypto. We have a responsibility to ensure that when they do, they are not taking risks they do not understand or running the risk of losing money they did not realise they were liable to lose. We certainly do not want to see people losing money they cannot afford to lose.

The challenge is to maximise the very obvious potential benefits while, at the same time, minimising the risks to individuals, businesses and potentially—let’s not kid ourselves—to entire economies. This thing will get big enough that if it goes wrong, it could bring down entire economies. If it goes well, clearly it would have massive benefits for us all.

Consumer protection must be at the heart of the Government’s regulatory approach. I find the implication that consumer protection has been deprioritised in the Financial Services and Markets Bill quite concerning; it will not be one of the things to which the regulators will be instructed to give high priority. I urge the Government to ignore the siren voices of some on their own Benches who call for a completely unregulated free-for-all, which would be the way to absolute disaster for the many. There would undoubtedly be untold riches for the few, but it would be a highly irresponsible approach.