Cryptoassets: Regulation

Debate between Martin Docherty-Hughes and Abena Oppong-Asare

Wednesday 7th September 2022 Westminster Hall

[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.