Cryptocurrency Regulation

Andrew Griffith Excerpts

Wednesday 25th January 2023 Westminster Hall

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve under your chairmanship, Ms McVey. I congratulate the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) on securing this debate on crypto regulation, which follows the first debate on cryptoassets, led by her fellow party member the hon. Member for West Dunbartonshire (Martin Docherty-Hughes) in September last year. The hon. Lady is absolutely right that this is an important sector for innovation, and I commend her and the crypto and digital assets all-party parliamentary group for their work to upskill Members of this House in this important emerging area.

My goal is simple: we want the UK to be the home of an open, well regulated and technologically advanced sector. As the hon. Lady said, recent events have highlighted some vulnerabilities in the cryptoassets sector, but it is a big sector. We have seen how FTX’s collapse has impacted some consumers, but as with any emerging technology—and this technology is at an emerging stage for all its myriad potential uses—there will be risk. We understand the importance of risk in the system and that, regrettably, that brings failures as much as success and opportunity. That is part of the process of change itself.

The hon. Lady talked about how cryptocurrencies could be an area of Brexit opportunity, and because we have taken back control of our rulebook, this House—importantly—has the opportunity as well as the obligation to bring forward regulations. In that context, she talked about being the mum of a 14-year-old, all the potential jobs and the advice that she would give. Clearly, this is a world that has captured the imagination of young people. Anything we can do to get our young people to equip themselves with more STEM skills is very positive.

The hon. Lady also talked about the positive benefits in a sector in which, owing to its nature as a nascent and emerging sector, people are not always clear about its use cases. She made a powerful point about the use case in Ukraine and allowing that financial system to continue to work. Government policy is that we will introduce timely, sensible and balanced regulation to allow the safe use of the technology and allow participants in the sector to understand with certainty the environment in which they operate.

On the potential economy, the hon. Lady might be familiar with the work done by PricewaterhouseCoopers that estimates that blockchain technology, which underlies what is often referred to as crypto, could boost the UK economy by £57 billion by 2030. That is a sizeable opportunity and we are keen for the UK to seize its fair share. She talked about other jurisdictions that have introduced regulation, and it is right that we learn from them and use the opportunity to perfect our own regulation, but obviously we must ensure that we capture—if that is the right word—a fair share of the opportunities.

The fintech sector is a great success story for both the City of London and the wider UK economy, and last year the UK attracted more fintech investment than the next 13 European countries combined, so we have a real lead. Natural extensions of that sector are crypto firms and cryptoassets—people working with blockchain. It is important, therefore, that the regulations we introduce facilitate that.

The hon. Lady rightly raised the role of our regulators and their speed and agility. I will write to her, but will share now the figures that I have. I understand from the Financial Conduct Authority that 41 such firms are registered in the UK. Obviously, the FCA has its own regulations around that—the hurdles that firms have to clear—and I am interested in general, as we seek to have an agile and proportionate financial regulatory system, in our regulators moving at the right pace.

There are measures in the Financial Services and Markets Bill more generally to encourage the regulators—indeed, to compel them—to be more transparent about their key operating statistics, such as those in respect of speed. I think the hon. Lady talked about the number of authorisations and the average processing time for authorisations, which I hear about widely across the financial services sector and know is a focus for the FCA. It is important that it is: we cannot have a financial system that is competitive internationally if it has a slow latency and if it does not operate at speed. I share the hon. Lady’s concern, and if there are any additional measures I can obtain, I will of course write to her.

The hon. Lady talked about the importance of engagement between Ministers and the sector. I want to assure her that during my relatively short time in this role I have held a desire for broad and deep engagement. This is a really big sector. She might be interested to know that rather than having a standing council, as it were—Governments sometimes set up a group of 12 anointed figures and all the engagement is there—I want to be much more agile and to engage with a much broader range of people. My undertaking is to have six roundtables with the sector, but with a variety of sector participants, during calendar year 2023. That will build on the three roundtables that I have already held with the sector in the first few months since my appointment. That is a real commitment; this area rewards a lot of time being spent on it.

I assure the hon. Lady, members of the all-party group and industry bodies that I want to take an evidence-based and proportionate approach to regulation. That is something to which we all aspire. It is not helpful in any domain for people to make sweeping statements without offering facts and proof.

I hope I have addressed most of the hon. Lady’s points. There is one final point on which I wish to offer clarity: where we go from here. I do not have the precise date, but I assure the hon. Lady that the Government will very soon come forward with our consultation paper on the regulatory approach to cryptoassets. That will be a matter of weeks, not months, but I do not have the precise date. I urge people to get ready to respond to that paper. We will engage on the back of it, because it is of course just the next step in the process. The purpose of the consultation is that we have proportionate regulation, that we do it right and that it is practitioner led.

Of course, the flipside is that consultative processes sometimes makes things take a little longer than one might wish in a fast-moving domain. In order to get the balance right, I urge those with views to be ready to advocate them. They should be assured that they have a Minister and a Government who are keen to see the sector grow and to harness the benefits for the United Kingdom and the hon. Lady’s constituents. I would be delighted to return to update this place frequently on the progress of this exciting new sector.

Question put and agreed to.