Draft Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 Draft Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023

Tulip Siddiq Excerpts

Tuesday 2nd May 2023 General Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to see you in the Chair, Mr Gray. The Opposition will support the SI. In recent months, we have seen major scandals in the crypto sector, including the concerning activities of FTX; the collapse of so-called stablecoins, which saw the savings of millions of British people put at risk; and a surge in crypto-related crime and scams. It is therefore right that consumers are made aware of the significant dangers of purchasing cryptoassets, and that the companies promoting such assets are properly regulated.

I have a few questions that I wish the Minister to address. I am particularly concerned about the temporary exemption to allow cryptoasset businesses that are not authorised by the FCA but that are registered under anti-money laundering rules to communicate their own financial promotions. I know that the Minister will agree that the risks posed by the cryptoasset sector extend far beyond money laundering and include other forms of crime, such as many scams targeting the public, but how will the Government ensure that they have made it absolutely clear to the public that those firms are not authorised by the FCA, and that consumers are fully aware of the associated risks?

The organisation Positive Money, which the Minister will probably know, has made the case that if the Government are serious about an approach of “same risk, same regulatory outcome”, stablecoins should be regulated in a similar way to bank deposits. Has the Minister made an assessment of that proposal? If the Government plan to regulate stablecoins as e-money rather than as akin to bank deposits, how will the Treasury ensure that consumers are made fully aware that their funds are not covered by the financial services compensation scheme?

What work is the Minister doing to develop additional protections for consumers in this high-risk and volatile space? For example, has he considered requiring crypto firms to include risk warnings that make clear to investors the percentage of retail investor accounts that have lost money when trading cryptoassets, as is the case for firms offering spread betting and contracts for difference?

Finally, it is noticeable that the Government are making the distinction that non-fungible tokens are collectibles rather than financial investments. Does that mean that NFTs are not considered cryptoassets under the draft order? The Government recently U-turned on their instruction to the Royal Mint to issue an NFT as part of plans

“to make the UK a global hub for crypto asset technology and investment”.

Does the distinction made in the SI signal that the Government’s NFT offer has finally been abandoned?

[The Chair]

I call Kevin Brennan. Will Members stand up if they wish to speak? It is hard to see people.

--- Later in debate ---

[Tulip Siddiq]

The Opposition support the SI, and recognise that the current ancillary activities test, onshored into UK legislation from the EU rulebook, is too complicated. My only question for the Minister is how the Government will work with the FCA to ensure that relevant stakeholders are consulted on a new test.