Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether he has plans to protect (a) long-term retail and (b) amateur investors in crypto-currencies; and what steps his Department plans to take in the event of significant or long-term falls in market values of the different types of (i) current and (ii) future cryptocurrencies.

The Government established a Cryptoassets Taskforce in 2018, consisting of HM Treasury, the Bank of England, and the Financial Conduct Authority (FCA). The Taskforce’s objectives include exploring the risks and opportunities of cryptoassets, the potential benefits and challenges of Distributed Ledger Technology (DLT) in financial services; as well as assessing what, if any, regulation is required in response.

HM Treasury and UK authorities have taken a series of actions to mitigate risks to retail investors, stability, and market integrity, as well as preventing the use of cryptoassets in illicit activity.

Last year, the Government issued a consultation on a proposal to bring certain cryptoassets, including Bitcoin, into the scope of financial promotions regulation. This would ensure that relevant cryptoasset promotions are held to the same high standards for fairness, clarity, and accuracy that pertain in the financial services industry. The Government will be publishing its response in due course.

To further protect consumers, the FCA has banned the sale of cryptoasset derivatives to retail consumers, and recently issued a warning stating that consumers who invest in cryptoassets should be prepared to lose their money. Alongside this, the Government launched a new anti-money laundering and counter-terrorist financing regime for cryptoassets in 2020.

The Government launched a consultation on its regulatory approach to cryptoassets and stablecoins on 7 January. This set out the Government’s position that new innovations in the sector could deliver substantial benefits, but also present new challenges and risks. This consultation has now closed.

The Government is processing responses and will outline next steps in due course. Any steps taken in light of this consultation will aim to balance the potential risk to consumers with the ambition to foster competition and innovation in the sector.

The Government continues to actively monitor emerging risks as this market continues to mature and stands ready to take further regulatory action if required.