Cryptoassets: Regulation

Martin Docherty-Hughes Excerpts

Wednesday 7th September 2022 Westminster Hall

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

I beg to move,

That this House has considered the Government’s regulatory approach to crypto-assets and currencies.

It is good to see you at least in the Chair, Ms Rees, and it is good finally to be here to talk about a subject that has produced an awful lot of heat and often little light in this place—that of the regulations on cryptocurrencies. I hope you will forgive me if I go on at some length about the issues that I think we have to debate in Parliament today.

We should start with a few pieces of accountability as, of course, we are not quite in the post-trust era. I am the chair of the all-party parliamentary group on blockchain, as well as being a vice-chair of the crypto and digital assets all-party parliamentary group. I see the chair of that all-party group, my hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron), in their place today. The latter group is a relatively new kid on the block as it was established just last year, whereas the all-party parliamentary group on blockchain has been around for some time.

Let me come to the first of many aspects of what we can see as a sort of cognitive dissonance around the idea of crypto. Despite the fact that we often talk about crypto as a new kid on the block, it is now a pretty widely accepted concept, even if a poorly understood one, and I am glad to see that we have interest in today’s debate from across the Chamber—at least, I think we have interest from across the Chamber. I hope we will hear a lot of interesting ideas about what the future holds, and I will add a couple of suggestions of my own towards the end of my speech. Given that this is the first debate in the House on the subject, we require something of a tour d’horizon of the landscape as it lies today before we move on to the challenges and some opportunities that recent developments provide for the future of crypto.

Before doing so, however, let me place on the record my gratitude to the secretariat of the all-party parliamentary group on blockchain, led by Professor Birgitte Andersen of the Big Innovation Centre. Her leadership in creating space within the all-party parliamentary group to allow many of the big issues of the day to be debated over the past few years has been vital, and the work put in by her researcher, George Farrer—and indeed by his predecessor, Fernando Santiago—to ensure that the topics remain current and relevant has been much appreciated.

Through the forum that the all-party parliamentary group provides, I was able to meet Dr Robert Herian, now of the University of Essex, and I am much indebted to the work he has done, particularly in his 2018 book “Regulating Blockchain”, which will provide the basis of some of the suggestions I make today. If Members are interested in the subject, they should buy a copy of the book. I am sure Dr Herian will be glad of the plug.

For a movement that is often described as a cult, it is apt that crypto even has its own origin story: it was invented on 31 October 2008 with the release of Satoshi Nakamoto’s “Bitcoin Manifesto”. However, as with much of the myth and legend around the subject, it is unclear whether Nakamoto is a single person, or indeed whether much of the work was singly their own, given that theoretical work had been done on different concepts of blockchains, going back to the early 1980s.

What Nakamoto’s manifesto did, however, was bring the technology to wider prominence. There was a ready pool of adherents in the immediate aftermath of the 2008 financial crisis, who understood the importance of decentralised finance and the potential to move beyond financial institutions as they have been conceived hitherto. Progress was slow but steady at first, but it picked up in the middle of the last decade with the release of books such as Alex and Don Tapscott’s “Blockchain Revolution” in 2016, which was my gateway into the possibilities of the technology. That was followed by exponential growth over the past few years, with the rocketing in value of not only Bitcoin but other cryptocurrencies such as Ethereum and the range of memecoins, which made up so many of the initial coin offerings that we saw around 2018-19.

All the way through, many have predicted a crash, but the pandemic lockdown saw crypto reach unforeseen heights, whether it was furlough cheques or the lack of faith in existing investment that drove the trend. The high watermark seems to have been in November 2021, when the value of one Bitcoin reached about $68,000. The ultimate symbol of the bubble may well have been the adverts during the American Super Bowl half-time break, with Hollywood A-listers such as Matt Damon and Larry David imploring us to buy crypto.

The Super Bowl ads were not just good at showing us what the bubble looked like; they probably go down as one of the supreme examples of what crypto’s contribution to our discourse has been: its unique culture. One had comedian Larry David decrying seminal innovations throughout history—the wheel, the toilet, the light bulb—before doing the same with crypto. “Don’t be like Larry,” the ad exhorted the watching millions, “Don’t miss out on the next big thing.”

FOMO, or fear or missing out—there are plenty of folk in this place who have that—has certainly motivated many to get into crypto, but so have a range of other acronyms that appear on the profusion of online crypto culture forums. I hate acronyms, as many of my colleagues know, but the one that struck me the most is HFSP—have fun staying poor. It is a motto that manages to encapsulate so much: the unscrupulous nature of so much of this mainly unregulated space; the background of so many crypto investors, cut off from access to the traditional markets; and the pervading millennial jokey humour.

I come to the first very important point at which more Government attention needs to be paid to crypto. The market has been allowed to proliferate, drawing in uninitiated small-scale investors, who begin crypto trading because they see only the upside: the market that lies beyond outright scams such as Squid coin or OneCoin, in which investments of dubious provenance have been hyped and pumped, attracting the hard-earned savings of so many people.

I represent one of the poorest constituencies in the country, West Dunbartonshire. I grew up in that community in the ’70s and ’80s and lived through what I believe was its ruination by Thatcherism. It is still a resilient community, but too many feel marginalised and remote even from our neighbour, the city of Glasgow. Many of my constituents are the type of people who have been caught up in the dubious practices around crypto, and I wish more could be done about it, especially as we head into the cost of living crisis. We need to remember that it is often those who feel they have nothing to lose who are the targets of scams.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

I thank my hon. Friend for bringing this extremely important debate to Westminster Hall. Given all that he is saying, does he agree that consumer protection needs to be at the heart of a regulatory framework? We should highlight some of the good examples of innovative businesses, including in Scotland, such as Zumo in north Edinburgh and Scotcoin in north Glasgow, which are creating jobs in the industry.

[Martin Docherty-Hughes]

I do not disagree, but I will talk later about the reality of the existing regulation and how we should lead best practice.

It is important that regulation is able to make a clear delineation of where the legitimate business exists and outright scam cannot. Despite the halving of the value of Bitcoin since its peak in November, it remains at a price much higher than it held a few years ago. Although many will argue over the inherent value of crypto, the market remains remarkably buoyant, despite all that has happened.

Many of the challenges begin with the merest definitions involved in the whole business. As I said, I hate acronyms. All the DLTs, NFTs and CBDCs are confusing enough before we even get to the question of what crypto actually is. Is it an asset? Is it a technology? Is it an idea?

Another enduring problem of crypto, encapsulated in that Larry David advert, is its novelty: the idea that we have a genuinely world-changing thing before us. That idea falls apart immediately as it comes into contact with the real world. As an asset class, it has proven to be resilient neither to inflation nor to external shocks, never mind the fact that conventional and centrally regulated currencies have continued to attract a far larger interest as a holder of value in straitened economic times.

It has been difficult to keep up with the pretence of some of the more outlandish claims about the technology’s potential, as they struggle with the evidence of the past few years. International bank transfers, for example, are still cheaper, when taking into account the need to convert crypto into fiat currency. There remains a massive legitimacy problem given that the post-truth aspects of blockchain technology struggle when put beside existing institutions.

Even the idea of a decentralised and therefore more equitable structure has struggled against the demonstrable fact that so many cryptoassets remain in the hands of so-called whales—the few at the top who managed to get their timing right or to be there when the currency started. Far from being a novelty, the lived experience of the crypto bubble has reinforced the fact that there truly is nothing new under the sun. While so much of it remains a new arrangement of an old song, we hear riffs that echo debates that are being had outwith the crypto bubble; debates that have resonance in the fields of economics, sociology or computer science.

Solutionism is the idea that there is a clever, technological answer for all of life’s problems and that, somehow, human nature can be overridden with the application of the requisite solution. Crypto fits squarely in that space. One wag called it a solution in need of a problem, and a whole range of problems have been hastily set up to be solved by it. As we will see, that gets entirely in the way of the more durable and sustainable uses that it has.

Principal among those is the way in which many adherents seem to revel in the way that crypto offers the opportunity to turn the current logic of most of the internet on its head. The current logic is that we are offered free services in exchange for access to our metadata. Instead, this bold new vision goes, we should—or could—monetise these fractional shares of data, which we give back to, say, Facebook or Google. The value of popular tweets that we make could be released, as could that of those Instagram posts that have been gathering likes but no dollars. There is obviously not the same value to be released for everyone, especially a boring auld guy like me. [Interruption.] I am grateful for the support of my hon. Friends. There is a lot of doubt about how much that value would ever amount to, but the principal argument against this sort of future for crypto is that it adumbrates a dypstopia where every single aspect of our lives that could be monetised can be and where our maximum productivity can be released.

For many, including some in the House of Commons, that is the final step on the way to a new liberal utopia, where we know the price of everything, although the cynic in me thinks that we will miss out on the value of quite a lot. Given the way social media has descended into something of a mess, catering to what seems like a mixture of our lowest common denominator and our basest desires, I am not sure that giving human beings the ability to monetise absolutely everything creates a positive incentive.

This idea makes the assumption not only that the technology is the most efficient way to solve these problems, but that it is the most efficient version of itself. In speaking to those who have worked on the technical side of the crypto industry, it is remarkable how imperfect the technology itself is, mainly because it has humans involved in its creation. To take one example, coders make errors in one out of every 10 expressions, or every three lines of codes—code that is, of course, written in a way that reflects the biases of the person writing it.

In cryptocurrencies that seek to use the technology to incorporate smart contracts, and therefore programming languages, that opens up a whole range of exploits, with systems not working as they should and money being vulnerable to theft. According to one estimate, 5% of all decentralised finance—or DeFi—funds are lost in that way, which is especially problematic when most of those funds are uninsured.

The technical issues are dwarfed by the environmental impact of crypto, which is a truly vast problem that threatens to undo all the good that it could bring. Essentially, the technology inherent in most forms of crypto—nodes competing to solve puzzles to access coins—creates the incentive to use increasingly large, expensive and energy-intensive servers. Not only does that consume vast amounts of electricity—the equivalent of the annual energy use of Argentina, accordingly to legend—but it creates another brick in the wall of a crypto oligarchy, with the largest investors able to control far more of the servers and thus far more of whatever cryptocurrency is held there.

There are certainly workarounds, and I hope to explore some of that in my speech, but as we stand here today, looking at the landscape, it is not only another challenge that cryptocurrency advocates need to overcome but, added together with the other questions I have laid out, it becomes something more significant that needs to be addressed if they want crypto to become part of their daily lives.

Before I am accused of being too much of a negative Nancy, it is important to understand exactly where we are at the moment, because only by doing that can we better understand the potential for blockchain technology. Then we can focus better on the regulation that we need to bring in to ensure that it thrives. My biggest fear is that bringing in regulation means changing so much of the culture in the industry, and dialling down so many of the solutionist expectations of its adherents, that it may not be possible, but I am going to give it a shot.

It will be difficult to push back so much of interest that has been created in the crypto community and it is important to understand what is motivating these investors, many of whom are young or from non-traditional finance backgrounds, especially as we stare down the barrel of a cost of living crisis and the inevitable recession that will follow. Blockchain’s genesis, following the 2008 financial crisis, is central to this.

The possibilities for demystifying finance, and for allowing normal investors access to resources usually only available to those able to access corporate lawyers, is certainly within reach, if the capabilities of so-called distributed autonomous organisations—or DAOs—are realised, not only as an add-on for existing companies, businesses and commercial practices, but as a way of creating a new type of entity that can avoid the pitfalls of oligopolistic capitalism.

Blockchain’s birth as something of a libertarian project has obscured the incredible potential for the technology to improve government efficiency, clamp down on tax avoidance and increase accountability for those in public life. The best existing example of that can be found in the Republic of Estonia; I should probably add that I am chair of the all-party parliamentary group on Estonia. Estonia began a roll-out of blockchain in its governmental processes from the Ministry of Finance, and in doing so made all other Ministries reliant on the technology themselves and ensured that one of the central pillars of the social contract—the relationship between the taxpayer and the Government—was radically accountable.

As things stand, the necessarily slow pace of regulation means there is every incentive for individuals to stay a couple of steps ahead of regulation, exploiting loopholes and bending the rules as much as possible. They are of course supported by an industry of enablers and administrators who find ways for their clients to keep to the letter of the law while evading the spirit of it, although often not even succeeding at that. That means that Her Majesty’s Revenue and Customs is always playing catch-up, with any deterrence factor it represents always being ex post facto.

The radical solution offered by crypto is turning that calculation on its head, as Dr Robert Herian outlines in his book, “Regulating Blockchain”:

“Blockchain may offer an opportunity to recalibrate the power play between those who would engage in aggressive tax strategies and planning, and those charged with regulating or containing them by, for example, more effectively enforcing tax liabilities ahead of settlement on trust, rather than relying on bringing trustees to account post settlement.”

This is the essence of blockchain for good—an idea that the all-party group, of which I am chair, very much tries to promote: both individuals and the Governments they elect should be given the ability to hold third parties accountable in liberal democracies, and hopefully beyond.

In ensuring that crypto plays the role that it could, regtech—regulatory technology—will come increasingly to the fore over the coming decades. Given its traditionally attributed birthdate of 2008, we should note that crypto is now entering its third decade of existence, and I like to think that that could herald a new-found maturity. If there is something that we need to take from the recent crash, it is that the wild west days of crypto are over. Too many people have been affected, and too much is now at stake. The Government now have the opportunity to rein in the crypto bros and ensure they make good on their promises to investors, creating the environment for an industry ready to realise its potential.

In that spirit, I hope to make a few suggestions of my own about I think the Government should proceed. In the spirit of there being nothing new under the sun, which I touched on earlier, it is important to start with the Government and stakeholders understanding how much law is already in place to curb the worst excesses of a supposedly unregulated market. To quote Dr Robert Herian again:

“sandbox culture as the sine qua non of contemporary regulatory standoffishness at the state level has ultimately spawned the problematic regulatory conundrum with which we are now faced, one in which innovations and solutions have been legitimised.”

Quite simply, in pretending that they have no levers at their disposal, the spies and speculators who have proliferated all the way through our economic history have re-emerged in the guise of the crypto bros. The biggest step that the Government could take to redress the balance is to enforce the law that they already have.

Fraud is fraud—there are no two ways about it. The police are overwhelmed dealing with novel scams, but scams are what they are. Better training for those dealing with enforcement, and ensuring that they are able to work with those in industry who are ahead on best practice, is crucial. All of that cascades from an empowered and properly funded Financial Conduct Authority, which is not deliberately, as many have speculated, underfunded and under-resourced as a way of ensuring that many offenders slip through the gaps.

This situation has created many of the trust issues that crypto seeks to address: smaller-scale investors get stung by unscrupulous practices that larger entities can use an army of lawyers to protect themselves from. Although we could get into a long philosophical discussion about trust and the possibilities for post-trust, it is important to note that this aspect of crypto has not proven as transformational as many of its adherents promised.

The idea that Bitcoin and other cryptocurrencies would prove to be immune from inflation, speculation and the like has proven to be demonstrably untrue, as has the idea that a new form of stablecoin could come in as a forum of neutral exchange between the various types of crypto. The problems experienced, for example, by the Tether stablecoin demonstrate this. A simple solution whereby every dollar of the stablecoin is backed by a dollar of assets fell apart under the lack of accountability for the company’s owners, and the markets reacted in the way that markets usually do when promises are not met. In this place, vital to the functioning of any sort of crypto culture, the deliberate lack of trust—the post-trust aspect of the crypto stablecoin—came off worse after coming into contact with the entirely rational human instinct to need the sort of trust that has hitherto been provided only by institutions and, in this context, central banks.

My second proposal for regulation is therefore that the Government not only bring forward the regulation expected in the Financial Services and Markets Bill, but do their utmost to ensure that debates around that exceptionally important crypto development are able to be had in the House—and not only when the Bill is in Committee. The Bank of England published feedback on central bank digital currency proposals in June last year. It stated five core principles, the first of which is the most important:

“Financial inclusion should be a prominent consideration in the design of any CBDC.”

Paying heed to that core principle means the scales being tipped back away from the crypto whales, who are increasingly hoarding the new assets, in favour of the average investor, realising the potential that gave so many, previously excluded from the system, some hope that they could be part of it.

Similarly, the opportunities for Government to enable financial inclusion through the development of proposals for decentralised autonomous organisations are vital to ensuring that the benefits of access to stable digital fiat currencies can be extended to the broader commercial sector. I hope that company and contract law can keep pace with such developments in an inclusionary way. At the heart of that is, obviously, the Financial Services and Markets Bill. I hope the Minister will allow time in his remarks to elaborate on those aspects that may not come to the fore in the limited time that will be allocated to the new occupant of No. 11.

I have presented two solid, legalistic opportunities for the Government to regulate crypto, but I should also like briefly to touch on the opportunities that exist for the environmental impacts of crypto to be negated, with the creation of carbon-neutral data centres. It will come as no surprise to anyone who has paid attention to the renewable energy sector that the nation of Scotland is ultimately blessed with resources that should see us well placed to make the transition not only to a carbon-neutral future but—and forgive me for saying it—an independent, sovereign one.

However, thanks to the work of fellow SNP member Stuart Evers, we can see that Scotland also has the opportunity to become a hub for carbon-neutral data centres, which make use of three qualities that Scotland has in abundance: not only the technical expertise to provide new network security in large data centres, but the physical security offered by our natural landscape and the energy security provided by ready access to what are called dual renewable resources, whereby a primary green energy source is always backed by another green source should it fail. That is best accomplished by a combination of wind and tidal energy. Thanks to Stuart’s preliminary work, we can see that Scotland hosts a plethora of potential locations for such centres, primarily along our west coast and in the Orcadian archipelago. That is certainly not crypto-specific, but it is an important point to make when we think about the ways in which the benefits of a well-regulated and well-run crypto industry could be felt across these islands.

I appreciate that I have taken up quite a lot of the time allocated for the debate. I have set out three solid areas where this Government could legislate to better realise the promise of the crypto industry, but my primary objective was to ensure that there was, for the first time, a forum for debate on the many areas for regulation of the sector. I hope that I have provided a suitable introduction to the challenges and opportunities that exist in an increasingly fast-paced industry. I look forward therefore not only to the Minister’s remarks but to what hon. Members have to say about the potential they see in making crypto work better for everybody.

[Christina Rees (in the Chair)]

I intend to start the winding-up speeches at about 10.25 am, so if Back Benchers are kind to each other, there is no need to put a time limit on speeches.

--- Later in debate ---

[Alexander Stafford]

I thank the hon. Member for her intervention and for all the hard work she is doing on this subject. She is right: we need to get these business regulated more quickly. We cannot rest on our laurels; we need to get things going, although that applies to all business, whether crypto or not. The UK needs to encourage more businesses to establish themselves more quickly, and we should have the regulations in place to make the UK accessible.

This new Government must look at increasing the level of public education around cryptocurrencies. The most common crypto-related Google search query is, “What is cryptocurrency?” That is nearly five times more common than any other. The public—from the schoolyard to the retirement home—need to be educated about the risks and rewards of this new financial asset. As with all new technology or financial tools, there clearly are risks. According to Action Fraud, nearly £150 million was scammed and stolen through crypto-related fraud last year. Educating people is the only way to ensure sensible decisions.

That being said, there are significant rewards to be gained from crypto, including instant free transactions, which will help businesses deal internationally. Meanwhile Britons will be able to transact in new ways that were previously impossible: they will be able to pay their energy bills per unit used, have their hourly wages paid on the hour or have increased privacy when paying for goods and services. Britons must be shown that the benefits are there if they approach crypto sensibly, but they must also know the risks.

That being said, given that crypto ownership is already on the rise, we cannot rely on education alone. The estimates of how many Britons own some form of cryptoassets range from 5% up to 20%, with that number clearly increasing year on year. As well as educating the public, we must rethink the regulator’s approach to cryptocurrencies. As I mentioned, there are serious risks involved in investing in crypto, even with the so-called stablecoins, as we saw with the rapid decline of Terra earlier this year. However, the current system serves only to suppress British businesses, without offering enough protection to customers and consumers.

[Martin Docherty-Hughes]

Does the hon. Gentleman not accept, as I said, that fraud is fraud, and that if fraud is being done, it needs to be dealt with by the appropriate authorities? It is up to the Government to make sure they actually clamp down through existing legislation.

--- Later in debate ---

[Abena Oppong-Asare]

I support the hon. Member’s comments about Ukraine. I am not saying that using crypto should be scrapped, but the Government need to take more action to address the fact that there are issues related to the growth in fraud and in activity that is damaging to the UK. Too often, the Government have stood by and let firms responsible for these scams trade with impunity. They have continued to delay the introduction of stronger rules on the advertisement and marketing of cryptocurrency products. A survey by investment platform AJ Bell found that many crypto investors are simply unaware of the high-risk nature of their investments.

[Martin Docherty-Hughes]

I hope the hon. Lady agrees that, as I said in my speech, we have existing legislation that we should be pushing to the fore while we wait on new regulation. I take the point made by my hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) about Ukraine and cryptocurrency in that state, but there is clearly a high rate of scamming in relation to the raising of cryptocurrency for the Ukrainian Government and their campaign against the Russian Federation. Sometimes, people might not be giving their money to Ukraine; they might be giving it to some scammer in North Korea, or in the Russian Federation, who says they are raising money for Ukraine.

[Abena Oppong-Asare]

The hon. Member makes an important point—he has expertise in the area—and there needs to be some sort of action from the Government to ensure that there is an overall strategy to address the issue. Some companies are doing good work, but they are not aware of the high risks, which links with what the hon. Gentleman has just said about the high rate of scamming. The high rate of scamming is worrying, particularly as many investors have sunk a huge proportion of their savings into crypto. Half do not have an individual savings account while four in 10 do not even have a pension. The serious collapse in crypto risks not only wiping out the life savings of many people, but significantly disabling the UK’s financial market. I am sure none of us wants that to happen.

The Government responded to their consultation on the regulatory approach to cryptoassets, stablecoins and distributed ledger technology in April, and there are measures to bring stablecoins into the regulatory perimeter in the upcoming Financial Services and Markets Bill. We will of course scrutinise the Bill carefully and look closely at what progress is being made through Parliament, but I have a number of questions to ask the Minister, particularly in relation to this debate.

Why have the Government introduced legislation relating only to stablecoins, and not a comprehensive regime for crypto more broadly? It is simply not good enough that they will not even consult on such a regime until later this year, as the stats show that urgent action is needed. If we do not have a comprehensive framework to address the risks and opportunities presented by cryptoassets, we risk falling behind our global competitors in the crypto space, including the US and the EU, which has just agreed a comprehensive regime for regulating the cryptocurrency industry.

How will the Government crack down on misleading advertising promotions, beyond regulated stablecoins? Members from across the House have discussed fraud today, and the Government need to take responsible action on it. I do not want consumers to be left to deal with it and take responsibility for it. Does the Minister accept that the Government have failed to address money laundering and fraud in this sector, and have allowed criminals to get rich at the public’s expense?

How will the Government ensure that enforcement agencies have the powers they need to crack down on digitally savvy criminals operating through electronic money institutions and cryptoasset firms? The industry is fast-moving at the moment, so does the Minister believe that there is the necessary capability and expertise in the Financial Conduct Authority and other agencies to deal with crypto? Labour is calling for greater powers for regulators and enforcement agencies to crack down on anonymity-enhancing technology, misleading advertising and the criminals operating in the crypto space.

The Government have ignored these serious and important issues for far too long, and the former Chancellor, the right hon. Member for Richmond (Yorks) (Rishi Sunak), seemed more interested in his NFT gimmick than a proper regulatory strategy. We still do not know the cost of that project, despite responses to parliamentary questions confirming that the Treasury holds that information. Perhaps the Minister can shed some light today on what that information is. The lack of transparency on how much taxpayers’ money has been thrown down the drain on that gimmick is frankly shocking, but hardly surprising from this Government.

A Labour Government would be serious about attracting fintech companies to the UK and safely harnessing the progressive potential of blockchain technology. To do that properly, we need thorough and thoughtful regulation of the sector, and I look forward to the Minister setting out how the Government intend to do that.

[The Economic Secretary to the Treasury (Richard Fuller)]

It is a great pleasure to serve under your chairmanship, Ms Rees. I join all hon. Members who have spoken in congratulating the hon. Member for West Dunbartonshire (Martin Docherty-Hughes), first, on securing the first parliamentary debate on this topic and, secondly, on his tour de force speech covering the opportunities and risks of crypto technology. I expect that this will be the first of many debates on the subject.

During today’s debate, hon. Members have rightly focused largely on the risks of the new technology, concerns about consumer protection and areas for regulatory clarity, but I suggest that we all share the hope that, through innovation and creating the right conditions, we can achieve opportunities for the crypto industry in the UK to contribute largely to the growth of the wider economy.

I hope to cover a number a points that the hon. Member made in his opening speech. I will start with three of them: financial inclusion issues, particularly with regard to central bank digital currencies; requirements for carbon neutral data centres; and enforcing the existing law against fraud. I hope to cover those points in my speech, but if I do not, I look forward to engaging with him, the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) and her APPG in the future.

Throughout the debate we have spoken about a wide range of related but distinct terms, and I would like to take a moment to separate some of them. First, distributed ledger technology is exactly what it says: it is a form of technology that allows ledgers to be kept up to date despite being in multiple places or distributed. Secondly, blockchain is a type of DLT that uses encryption, adding security and new functionalities. That is the technology that underpins crypto, although it also facilitates innovation in many other sectors, such as trade finance. Thirdly, cryptoassets are privately issued digital assets that rely on distributed ledger technology such as blockchain for their workings and security. So-called cryptocurrencies are the most well-known cryptoassets today. I will use the phrase “crypto technologies” to refer to cryptoassets and the blockchain that underpins them in the round. Stablecoins are cryptocurrencies that seek to maintain a stable price by pegging to a real commodity or a currency, but there are other forms of stablecoins that have their supply regulated by algorithm. Again, there are two separate terms under that overall heading.

I and other hon. Members have mentioned the central bank digital currency, which is a form of digital money issued by central banks. CBDCs are structurally different from cryptocurrencies, which are almost always decentralised whereas CBDCs are controlled by a central bank. The Government have already committed to issuing a public consultation on this topic, jointly with the Bank of England, later this year.

A number of hon. Members pointed to the issue of financial inclusion. There has been no decision on the issuance or design features of a CBDC, or indeed whether we will do one. In those decisions, considerations about financial inclusion and accessibility of central bank digital currencies will be at the heart of any technical design decision. I hope that addresses one of the concerns raised by hon. Members.

In all its forms, we are still on the cusp of the technology breaking through, and its uses are likely to evolve dramatically in financial services. As hon. Members have said, thousands of cryptoassets, including Bitcoin, have been issued, and together these have a total market capitalisation of around $1 trillion today.

[Martin Docherty-Hughes]

There is so much value. Does the Minister recognise that this technology is not new? It has been around for nearly three decades.