Second Delegated Legislation Committee
Wednesday 11th November 2026
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14:30
14:30
Speaker 2
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Speaker 2
It. Is it the wish of the committee that the instruments be debated together? Yes, yes. I will now call the Minister to move the first motion and to 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. I call the minister to move the first motion. Minister.
14:30
Speaker 3
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Speaker 3
Thank you, chair. I beg to move that. The committee considers the draft Fisma Crypto Asset Miscellaneous Amendments Regulations 2026, and I'll also speak to the draft Fisma addition of relevant Enactments regulations 2026. And chair, these two instruments serve a common purpose. They make targeted, practical changes to relevant regulatory frameworks to support innovation in our financial services sector, whilst very, very importantly, maintaining appropriate protections for consumers and for markets. We want the UK to maintain its position as a world leading financial centre as new technologies reshape payments and our financial markets, and this requires clear rules, proportionate regulation and the ability to remove barriers as markets develop .
In relation to the first, see the Fisma Cryptoassets Miscellaneous Amendments, regs and earlier this year. Honourable members will know we legislated to establish a financial services regulatory framework for crypto assets, including stablecoins, with the aim that that framework gives firms greater certainty to invest and innovate in the UK, but importantly as well, that we are protecting consumers. And this regime comes into force in October of next year. This instrument before us today does not replace or seek to reopen that comprehensive framework that we've introduced. It simply makes targeted refinements to ensure that the regime works as intended and remains proportionate and supports a competitive market here in the UK.
Its principal effect concerns UK issued qualifying stablecoins. Appropriately regulated stablecoins. Could we recognise, play an important role in both retail and wholesale payments? We've consulted widely on the wider reforms to payment regulation, including the treatment of tokenized payments such as stablecoins, but without these amendments that are before us today, firms using UK issued qualifying stablecoins in payment chains could be caught by the crypto asset requirements designed primarily for trading activities. Therefore, chair following continued engagement with the sector and indeed some really helpful input from from honourable members, we have concluded that that outcome would not be proportionate.
So this instrument therefore excludes UK issued qualifying stablecoin from the crypto asset dealing and arranging activities, and it also excludes their temporary holding from the safeguarding activity where that holding is in connection with the payments transaction. It's not. This is very clearly not about removing stablecoins from regulation entirely. Issuing qualifying stablecoin in the UK will remain regulated. Lending and borrowing activities will remain in scope, and overseas issued stablecoin will continue to be in scope of the crypto assets activities. Let me move chair to the second I see . So as honourable members will know, Fisma 2023 allows us to establish financial market infrastructure sandboxes, and in these sandboxes, firms can test use of new innovations and technologies in a live environment in relation to financial services markets, and each FMI sandbox provides a modified legislative framework to enable that to happen, where existing requirements might otherwise impede impede innovation, and the powers in Fisma 2023 were designed with flexibility in mind.
So 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, and section 17 of the act therefore allowed further legislation to be added to the list of relevant enactments in quotes, which is the list that defines what which pieces of legislation can be modified using the sandbox powers. So this instrument before us today adds a further ten enactments to that list of relevant enactments, and 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, or Digit, which would be the first digital gilt issuance in the G7, and puts us ahead of other countries in our digital in our agenda to push forward digital assets. So these additions will allow the digital security sandbox to operate more effectively and provide the legislative flexibility needed to enable digital to be issued through a platform operating within the DSS, the digital securities sandbox. I should just make clear, chair, that this instrument does not modify the enactments listed in this s I.
Instead, it only brings them within scope of the existing FMI sandbox powers, so that necessary modifications can be then made through the sandbox framework. To conclude, then chair. These instruments are practical steps within our wider programme of work to modernize UK financial markets. They hope they do, I hope, provide regulatory clarity. They seek to remove barriers where that is a sensible and proportionate thing to do, and they also allow new technology to be tested responsibly in a way that continues to to protect people. And I hope that honourable members will feel able to support both instruments.
In relation to the first, see the Fisma Cryptoassets Miscellaneous Amendments, regs and earlier this year. Honourable members will know we legislated to establish a financial services regulatory framework for crypto assets, including stablecoins, with the aim that that framework gives firms greater certainty to invest and innovate in the UK, but importantly as well, that we are protecting consumers. And this regime comes into force in October of next year. This instrument before us today does not replace or seek to reopen that comprehensive framework that we've introduced. It simply makes targeted refinements to ensure that the regime works as intended and remains proportionate and supports a competitive market here in the UK.
Its principal effect concerns UK issued qualifying stablecoins. Appropriately regulated stablecoins. Could we recognise, play an important role in both retail and wholesale payments? We've consulted widely on the wider reforms to payment regulation, including the treatment of tokenized payments such as stablecoins, but without these amendments that are before us today, firms using UK issued qualifying stablecoins in payment chains could be caught by the crypto asset requirements designed primarily for trading activities. Therefore, chair following continued engagement with the sector and indeed some really helpful input from from honourable members, we have concluded that that outcome would not be proportionate.
So this instrument therefore excludes UK issued qualifying stablecoin from the crypto asset dealing and arranging activities, and it also excludes their temporary holding from the safeguarding activity where that holding is in connection with the payments transaction. It's not. This is very clearly not about removing stablecoins from regulation entirely. Issuing qualifying stablecoin in the UK will remain regulated. Lending and borrowing activities will remain in scope, and overseas issued stablecoin will continue to be in scope of the crypto assets activities. Let me move chair to the second I see . So as honourable members will know, Fisma 2023 allows us to establish financial market infrastructure sandboxes, and in these sandboxes, firms can test use of new innovations and technologies in a live environment in relation to financial services markets, and each FMI sandbox provides a modified legislative framework to enable that to happen, where existing requirements might otherwise impede impede innovation, and the powers in Fisma 2023 were designed with flexibility in mind.
So 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, and section 17 of the act therefore allowed further legislation to be added to the list of relevant enactments in quotes, which is the list that defines what which pieces of legislation can be modified using the sandbox powers. So this instrument before us today adds a further ten enactments to that list of relevant enactments, and 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, or Digit, which would be the first digital gilt issuance in the G7, and puts us ahead of other countries in our digital in our agenda to push forward digital assets. So these additions will allow the digital security sandbox to operate more effectively and provide the legislative flexibility needed to enable digital to be issued through a platform operating within the DSS, the digital securities sandbox. I should just make clear, chair, that this instrument does not modify the enactments listed in this s I.
Instead, it only brings them within scope of the existing FMI sandbox powers, so that necessary modifications can be then made through the sandbox framework. To conclude, then chair. These instruments are practical steps within our wider programme of work to modernize UK financial markets. They hope they do, I hope, provide regulatory clarity. They seek to remove barriers where that is a sensible and proportionate thing to do, and they also allow new technology to be tested responsibly in a way that continues to to protect people. And I hope that honourable members will feel able to support both instruments.
14:35
14:36
Speaker 4
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Speaker 4
Thank you, Mrs. Harrison. Can I start off by thanking the Economic Secretary to the Treasury for her enthusiasm to engage after we met on this particular point in January this year. At the time when we debated this before, there was a problem which is highlighted, where there was a confusion between the difference between what is a crypto asset and what is a what is part of the payment system. Something like Bitcoin is effectively dematerialized gold and needs investment advice to , to be able to. For people regulated investment, advise people to invest into it. Whereas a stablecoin like tether actually is part of the payment system.
And, and it was incredibly thoughtful of her to engage with me and, and other people to be able to talk about this so that we can resolve the difference between these two things. And I particularly like to thank two people who gave me advice on this. They're far cleverer than I am. But Mike Ringer and Professor Sarah Green, who came in and raised the issue that there was a problem with this. And it is incredibly to my way of thinking, after being here for 16 years, incredibly good that Parliament worked so effectively. When we get together and and , and sort out a problem like this.
So can I just thank her for, for her engagement and all her officials who engaged on this as well? On the second s I this is all part of the City of London and the UK continuing to be at the forefront of financial innovation. And we are absolutely delighted that this is coming through. And again, we would like to thank her. So, Mrs. Harris, you have you have afternoon of unanimity and enthusiasm towards government.
But thank you very much indeed. Thank you.
And, and it was incredibly thoughtful of her to engage with me and, and other people to be able to talk about this so that we can resolve the difference between these two things. And I particularly like to thank two people who gave me advice on this. They're far cleverer than I am. But Mike Ringer and Professor Sarah Green, who came in and raised the issue that there was a problem with this. And it is incredibly to my way of thinking, after being here for 16 years, incredibly good that Parliament worked so effectively. When we get together and and , and sort out a problem like this.
So can I just thank her for, for her engagement and all her officials who engaged on this as well? On the second s I this is all part of the City of London and the UK continuing to be at the forefront of financial innovation. And we are absolutely delighted that this is coming through. And again, we would like to thank her. So, Mrs. Harris, you have you have afternoon of unanimity and enthusiasm towards government.
But thank you very much indeed. Thank you.
14:37
14:37
14:38
14:38