Cryptocurrencies: US Regulation

Wednesday 12th November 2025 Lords Chamber

Question

15:27

Asked by

[Lord Davidson of Glen Clova]

To ask His Majesty’s Government what assessment they have made of the risks to the finance system in the United Kingdom arising from the loosening of regulation of cryptocurrencies in the United States of America.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the UK is engaged with the US on crypto asset risks through international fora, and we have created a joint UK-US Transatlantic Taskforce for Markets of the Future, for enhanced collaboration on digital assets. The Government are legislating this year for a crypto assets financial services regulatory regime, with the Financial Conduct Authority as the lead regulator, so consumers are protected and firms have the certainty needed to invest and grow in the UK.

[Lord Davidson of Glen Clova (Lab)]

I thank my noble friend the Minister for his Answer. The risks normally associated with cryptocurrencies are volatility, fraud, money laundering and access to criminality. Have these risks been assessed by the Government, and if so, with what result?

[Lord Livermore (Lab)]

I am grateful to my noble and learned friend for his question. The Government’s approach to crypto assets seeks to strike the right balance between giving firms regulatory certainty and ensuring the sector has the space and flexibility to innovate. The Government recognise that our financial stability, as well as the other considerations that my noble friend mentioned, are associated with crypto assets, but they need to be balanced against supporting innovation and ensuring the UK positions itself as a competitive global destination for digital assets. Internationally, the UK financial authorities have been working, through the Financial Stability Board, to assess and develop supervisory and regulatory approaches to address the global financial stability risks posed by crypto assets and global stablecoins. We are also currently working to put in place a comprehensive domestic regulatory regime for crypto assets as financial services, to ensure the UK has the necessary protections for crypto asset usage.

[Lord Vaizey of Didcot (Con)]

My Lords, I declare my interest as the chair of the All-Party Group on Crypto and Digital Assets. The Minister’s remarks are very welcome. Does he agree with me that the risks around crypto are the risks of not regulating it? With one in four people in Britain now trading cryptocurrency —half of them under the age of 35—regulation has never been more needed. In essence, the key issue is time: we need to get on with it.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and pay tribute to his considerable expertise in this matter. I agree with what he said. Crypto assets have the potential to play a significant role in the financial services sector, and the economy more broadly, including through greater transparency, efficiency and security. We are already seeing the benefits that stablecoin can provide in cross-border payments by reducing costs and improving efficiency. Unlocking the full potential for digital assets and blockchain technologies requires payments that interact with them directly, and stablecoins can play an important role in achieving that. It is therefore important for the UK to harness those opportunities and—I agree with him on this—to bring forward legislation, and we will do so.

[Baroness Kramer (LD)]

My Lords, my concern is about the geopolitics. Much of the UK’s trade today is conducted in offshore dollars, which sit beyond the reach of the US Government. As dollar stablecoin replaces traditional dollars, the US Government will get their hands on levers to pressure us and others by threatening to curtail access. Are the Government looking at the key issues of monetary sovereignty? The regulators clearly are not.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. She is not correct to say that the regulators are not looking at that; of course they are taking it into account. She is absolutely right that the US is taking forward US-denominated stablecoin. It is very important that the UK does the same. The Government see stablecoin playing an important role in the diverse and competitive UK payments landscape. We hope that firms will see the advantages of being regulated as stablecoin issuers in the UK and will seek permissions under the new regime for that.

[The Earl of Devon (CB)]

My Lords, at the same time that the US is loosening regulation, as the Minister mentioned, the FCA is midway through its multi-year review of a comprehensive crypto asset regulatory regime. Can the Minister confirm that that review is proceeding in accordance with the published crypto road map? Is there any concern that the crypto sector and the UK’s innovation will be hampered by increased regulation at a time when other jurisdictions are loosening their regulations?

[Lord Livermore (Lab)]

I am not sure I share the noble Earl’s characterisation of the distinction between the two regimes. The US will legislate for their interests, and we will legislate for ours. The US passed legislation for the regulation of stablecoin in the summer. US regulators will publish their regulatory rules in mid-2026, with a backstop date of January 2027 for the US regime to go live. In the UK, the Government published draft legislation in April, with the final legislation due before the end of the year. Alongside that, the FCA is at an advanced stage in its consultations on the details of its regime, with a view to finalise its detailed rules and requirements in 2026. As I said at the outset, we have also created a joint UK-US Transatlantic Taskforce for Markets of the Future, to enable enhanced collaboration on digital assets.

[Lord Ranger of Northwood (Con)]

My Lords, I welcome the comments from the Minister on this topic and note my interest as co-chair of Digital Markets and Digital Money APPG. Two weeks ago, I was in Washington and met members of the US Securities and Exchange Commission—its chair, Paul Atkins, and its commissioner, Hester Peirce—to discuss “Project Crypto”, the road map it announced in August to modernise regulations for the digital asset economy. Its goal is to enable American financial markets to move on-chain and to position the US as a global leader in blockchain and crypto by creating a clearer, more innovative-friendly regulatory framework. While recognising the need to manage risks in financial stability, does the Minister agree that the greater danger to the UK is falling behind jurisdictions such as the US, if they move faster to enable innovation in crypto and digital assets?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and pay tribute, too, to his expertise in this matter. There is a lot of truth in what he said, which is partly why HM Treasury has jointly established the transatlantic task force with the US Treasury. The purpose of the task force is threefold: first, to identify and explore options for short to medium-term collaboration on digital assets, while legislation and regulatory regimes are still developing; secondly, to identify options to improve links between our capital markets, to enhance the growth and competitiveness of both UK and US markets; and, thirdly, to report, ideally, within 180 days. It is chaired by officials of HM Treasury and the US Treasury, including representatives from the UK and US regulators responsible for capital markets, so that we can share lessons between the two authorities.

[Lord Brennan of Canton (Lab)]

My Lords, do the Government have in mind any lessons from history when considering the potential consequences on the finances of ordinary people of a regulatory race to the bottom with regard to any kind of financial instrument?

[Lord Livermore (Lab)]

Possibly, but I do not at all share the characterisation made by my noble friend of a regulatory race to the bottom. As I have said, we will regulate in the UK’s national interest. The Government will bring forward the final legislation to create a financial services regulator regime for crypto assets this year. Clearly, we must strike the right balance between giving firms regulatory certainty, protecting consumers and ensuring that the sector has the space and flexibility to innovate.

[Baroness Neville-Rolfe (Con)]

My Lords, these markets are global. Can the Minister tell us what contingency plans the Bank of England and the Treasury have in place should a major crypto company in the US collapse, with consequences for UK savers and markets, now as well as once the legislation has gone through? When we last discussed this subject, the Minister helpfully agreed that the Government might present a discussion paper, which would help us all. When might we expect that, given the pace of change in this important area?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. As she knows, the Bank of England is the independent regulator for systemic stablecoin and will design its regime as necessary to manage the associated risks. On 10 November, just earlier this week, the Bank of England launched a consultation to seek industry feedback on its systemic stablecoin regime, building on the initial proposals set out in its 2023 discussion paper. This includes up to 60% of backing assets to be held in short-term sterling-denominated UK Government debt securities, consistent with emerging regulatory regimes internationally, and the proposed cap of between £10,000 to £20,000 for individuals and £10 million for businesses applying for systemic stablecoins and only after consultation. The Treasury and the Bank of England are maintaining a close and ongoing dialogue on the legal and regulatory treatment of stablecoins in support of the Government’s objective to make the UK a global destination for digital assets. In terms of any wider discussion paper, I am very happy to continue discussing that point.

[Lord Fox (LD)]

My Lords, my question concerns the Bank of England’s control over money supply. At what point, when the public are adopting cryptocurrencies, does the Bank lose control of the money supply? What calculation has the Treasury done, or has the Treasury done in conjunction with the Bank of England, to maintain national control over our money supply?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. The Bank of England’s Financial Policy Committee and the multilateral Financial Stability Board currently agree that crypto asset markets do not currently pose material risk to financial stability in the way the noble Lord describes but that stability risk may grow as connections between the traditional financial services sector and crypto markets increase. International and UK financial authorities have been working through the Financial Stability Board to assess and develop supervisory and regulatory approaches to address global financial stability risks posed by crypto assets and global stablecoins.