Draft Financial Services and Markets Act 2000 (Cryptoassets) (Miscellaneous Amendments) Regulations 2026
Draft Financial Services and Markets Act 2023 (Addition of Relevant Enactments) Regulations 2026
(1 day, 10 hours ago)
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The Economic Secretary to the Treasury (Lucy Rigby)
I beg to move,
That the Committee has considered the draft Financial Services and Markets Act 2000 (Cryptoassets) (Miscellaneous Amendments) Regulations 2026.
The Chair
With this it will be convenient to consider the draft Financial Services and Markets Act 2023 (Addition of Relevant Enactments) Regulations 2026.
I will now call the Minister to move the first motion and speak to both instruments. At the end of the debate, I will put the question on the first motion and then ask the Minister to move the second motion formally.
Lucy Rigby
These two instruments serve a common purpose. They make targeted practical changes to relevant regulatory frameworks and support innovation in our financial services sector while, very importantly, maintaining appropriate protections for consumers and markets. We want the UK to maintain its position as a world-leading financial centre as new technologies reshape payments and our financial markets. That requires clear rules, proportionate regulation and the ability to remove barriers as markets develop.
Earlier this year, as hon. Members know, we legislated to establish a financial services regulatory framework for cryptoassets, including stablecoins, with the aim of giving firms greater certainty to invest and innovate in the UK and, importantly, protecting consumers. The regime comes into force in October next year. The first draft instrument does not replace or seek to reopen the comprehensive framework we introduced. It simply makes targeted refinements to ensure that the regime works as intended, remains proportionate, and supports a competitive market here in the UK. Its principal effect is on UK-issued qualifying stablecoins.
Appropriately regulated stablecoins could play an important role in both retail and wholesale payments. We consulted widely on the wider reforms to payments regulation, including the treatment of tokenised payments such as stablecoins. Without the amendments before us today, firms using UK-issued qualifying stablecoins and payment chains could be caught by the cryptoasset requirements designed primarily for trading activities. Following continued engagement with the sector and with some really helpful input from hon. Members, we have concluded that that outcome would not be proportionate.
The first instrument therefore excludes UK-issued qualifying stablecoins from the cryptoasset dealing and arranging activities. It also excludes their temporary holding from the safeguarding activity where that holding is in connection with the payments transaction. It is very clearly not about removing stablecoins from regulation entirely. Issuing qualifying stablecoins in the UK will remain regulated. Lending and borrowing activities will remain in scope, and overseas-issued stablecoins will continue to be in scope of the cryptoassets activities.
Turning to the second SI, as hon. Members know, FSMA 2023 allows us to establish financial market infrastructure sandboxes. In those sandboxes, firms can test use of new innovations and technologies in a live environment in relation to financial services markets. Each FMI sandbox provides a modified legislative framework to enable that to happen where existing requirements might otherwise impede innovation. The power in FSMA 2023 was designed with flexibility in mind. When the power was created, it was not possible to know at that time every provision of legislation that might need to be modified as technologies developed. Section 17 of the Act therefore allowed further legislation to be added to the “relevant enactment” list, which defines which pieces of legislation can be modified using the sandbox powers. The second instrument before us today adds a further 10 enactments to that list.
The new enactments relate to areas such as debt issuance, company law, payment services and the rehabilitation of offenders. Certain areas of legislation were identified through our work to prepare for the issuance of the Government’s digital gilt instrument, DIGIT, which will be the first digital gilt issuance in the G7, putting us ahead of other countries in our agenda to push forward digital assets. These additions will allow the digital securities sandbox to operate more effectively and provide the legislative flexibility needed to enable DIGIT to be issued through a platform operating within the DSS. I should make it clear that the second instrument does not modify the enactments that are listed; it only brings them within scope of the existing FMI sandbox powers, so that necessary modifications can then be made through the sandbox framework.
These instruments are practical steps within our wider programme of work to modernise UK financial markets, and I hope they provide regulatory clarity. They seek to remove barriers, where that is sensible and proportionate, and they allow new technology to be tested responsibly and in a way that continues to protect people. I hope that the Committee feels able to support both instruments.
Mark Garnier (Wyre Forest) (Con)
I begin by thanking the Economic Secretary to the Treasury for her enthusiasm to engage after we debated this topic in January this year. A problem highlighted at the time was the confusion between what is a cryptoasset and what is part of a payment system. Something like Bitcoin is effectively dematerialised gold, so there needs to be regulated investment advice for people who have invested in it, whereas a stablecoin such as Tether is actually part of the payment system. It was incredibly thoughtful of the Minister to engage with me and others to resolve the difference between those two things.
I would particularly like to thank two people for giving me advice on that issue—Mike Ringer and Professor Sarah Green. They are far cleverer than me, and they came in and highlighted the problem. To my way of thinking, having been here for 16 years, it is incredibly good that Parliament works so effectively when we get together and sort out a problem such as this. I thank the Minister and all her officials for their engagement.
The second instrument relates to the City of London and the UK remaining at the forefront of financial innovation. We are delighted that this measure is coming through, and I thank the Minister once again. Mrs Harris, you have chaired an afternoon of unanimity and enthusiasm towards the Government.
Question put and agreed to.
DRAFT FINANCIAL SERVICES AND MARKETS ACT 2023 (ADDITION OF RELEVANT ENACTMENTS) REGULATIONS 2026
Resolved,
That the Committee has considered the draft Financial Services and Markets Act 2023 (Addition of Relevant Enactments) Regulations 2026.—(Lucy Rigby.)