Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether the Government has made an assessment of the potential merits of introducing a sterling- based stable coin in the UK.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The Government launched a consultation on its regulatory approach to cryptoassets and stablecoins on 7 January. This set out the view that stablecoins, which seek to stabilise their value, could be used as widespread means of payment and potentially deliver improvements in cross-border transactions. At the same time, depending on scale and nature of use, these developments could pose similar financial stability and consumer risks as traditional regulated payment systems.
The Government’s proposed approach would make sure stablecoins meet the same high standards we expect of other payment methods. The Government is considering 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.
Alongside this, the UK, like many countries globally, is actively exploring the potential role of central bank digital currencies: an electronic form of central bank money that could be used by households and businesses to make payments. The Bank of England published a discussion paper in March 2020, which considered the possibility of a retail central bank digital currency.
At Fintech Week 2021, the Chancellor announced a new Taskforce led by HM Treasury and the Bank of England to lead the UK’s exploration of a central bank digital currency, with separate forums to engage civil society and technology experts. The Taskforce aims to ensure a strategic approach is adopted between the UK authorities as they explore a central bank digital currency, in line with their statutory objectives, and to promote close coordination between them. The Government and the Bank of England have not yet made a decision on whether to introduce a central bank digital currency in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the potential value of Capital Gains Tax liability owed by UK residents in respect of Bitcoin trading and Decentralised Finance assets for each tax year from 2013-14 to date; what discussions he has had with representatives of the (a) Bank of England, (b) Prudential Regulation Authority (PRA) and (c) Financial Conduct Authority (FCA) on the potential merits of introducing a sterling-based cryptocurrency; what assessment he has taken of the potential effect of Bitcoin trading and Decentralised Finance on Money Supply measurements (i) M1, (ii) M2 and (iii) M3 and how that effect is measured; what assessment he has made for the implications of his Department’s policies on how the (A) PRA and (B) FCA will manage and control the Decentralised Finance transfer mechanisms in respect of the potential flow of assets and cash leaving the UK instantly; whether he plans to review the FCA’s regulatory (I) mechanisms and (II) performance in enforcing the banning of sales of cryptoasset derivatives to retail consumers; whether the FCA has introduced an authorisation and registration scheme for cryptoasset derivatives; what assessment he has made of the potential effect of the time taken to register cryptoasset derivatives with the FCA; what steps he is taking to ensure tax deriving from Bitcoin trading and Decentralised Finance is collected effectively; whether his Department has conducted an assessment of the potential merits of the FCA restricting UK banks from participating in the Decentralised Finance; what comparative assessment he has made of US and European financial firms’ participation in Decentralised Finance compared with that of UK firms; and for what reasons Euro clearing of financial instruments is moving out of the City of London.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
No estimate has been made on the potential value of capital gains tax (CGT) that are due on gains from cryptoassets held as investments or any tax liabilities arising from decentralised finance (also known as DeFi). The self-assessment form does not currently separate capital gains made on cryptoassets from other assets. As a result, a reliable estimate for CGT due from cryptoassets would only be available at a disproportionate cost.
The recently released cryptoassets manual, one the most detailed publications from any tax administration, explains the tax consequences of different types of transactions involving cryptoassets for both business accepting them as well as individuals using them. HMRC has taken action, including using powers provided by Parliament to gather data, to identify and investigate those that have failed to declare their tax liabilities.
Regarding the possible merits of a sterling-based stablecoin, I refer the Honourable Gentleman to the answer given to PQ UIN 37102.
On the issue of money supply, Bitcoin trading or decentralised finance will need to become a significant source of lending to the real economy in the UK before they have a notable impact on money supply measurements.
Regarding the Financial Conduct Authority (FCA) and the Prudential Regulation Authority’s (PRA) role with respect to decentralised finance, I refer the Honourable Gentleman to the answer given to PQ UIN 37103.
With regards to the FCA’s cryptoasset derivatives ban for retail consumers, the FCA stated that it found these products to be ill-suited for retail consumers due to potential harms, including the high risk of suffering losses. The FCA has noted that it will keep this prohibition under review. The FCA is an independent body and its decision to take the ban forward after consultation is based on powers granted to the FCA under statute, pursuant to the FCA’s objectives which include protecting consumers, enhancing market integrity and promoting competition.
Regarding the possible merits of the FCA restricting UK banks’ access to decentralised finance, the FCA is an independent regulator, and considers the risks of banks engaging in decentralised finance as one of the many risks it considers. Most decentralised finance activities are not regulated in the UK. Accordingly, the Government does not have accurate information on the number of entities operating in the UK in comparison to the EU and the US.
On the issue of clearing, the EU has granted a temporary equivalence decision to UK Central Counterparties (CCPs) which lasts until June 2022.
Therefore, without any further action by EU authorities, certain UK CCPs may need to begin offboarding EU clearing members by the end of March 2022 in order to be ready for equivalence expiring in June 2022.
However, letting equivalence expire in June next year would raise the cost of clearing for firms, particularly EU ones, and present significant financial stability risks. The Government therefore hopes that equivalence would not be allowed to expire in June 2022. As it stands, the Government has seen limited evidence of activity moving.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the capability of the FCA of enforcing the ban on Binance Markets Ltd operating in the UK.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
On 26 June the FCA issued a consumer warning stating that due to the imposition of requirements, Binance Markets Limited is not currently permitted to undertake any regulated activities without the FCA’s prior written consent. The FCA asked Binance.com to display the consumer warning on their website.
The FCA’s announcement relates to the UK entity (Binance Markets Limited) and does not apply to the Binance group (Binance.com) based outside the UK, which can continue to interact with UK consumers.
On 25 August, the FCA published its supervisory notice on Binance Markets Limited, alongside a consumer statement, which confirmed that Binance Markets Limited complied with FCA requirements.
The FCA is an independent body and its action regarding Binance Markets Limited is based on powers granted to the FCA under statute, pursuant to the FCA’s objectives which include protecting consumers, ensuring market integrity and promoting competition.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how much capital gains tax was collected from decentralised finance in each year tax year from 2013 to 2020.
Answered by Jesse Norman
Capital Gains Tax (CGT) is due on gains from cryptoassets held as investments which are taxed in line with CGT tax rates and exemptions rules as for other assets. The Self-Assessment form does not currently separate capital gains made on cryptoassets from other assets. As a result, a reliable estimate for Capital Gains Tax due from cryptoassets would only be available at a disproportionate cost.
Decentralised Finance (also known as DeFi) is a comparatively recent innovation with notable uptake during mid-2020. Amounts arising from decentralised finance are, generally, liable to either Income Tax or Capital Gains Tax. However, as with cryptoassets, the Self-Assessment form does not separate capital gains and/or income arising from decentralised finance. As a result, a reliable estimate of Capital Gains Tax or Income Tax collected from decentralised finance would only be available at a disproportionate cost.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the amount of capital gains tax (a) collected and (b) that remains outstanding owed from taxpayers under (i) Bitcoin trading and (ii) other financial activity in decentralised finance in each tax year between 2013 and 2020.
Answered by Jesse Norman
Capital Gains Tax (CGT) is due on gains from cryptoassets held as investments which are taxed in line with CGT tax rates and exemptions rules as for other assets. The Self-Assessment form does not currently separate capital gains made on cryptoassets from other assets. As a result, a reliable estimate for Capital Gains Tax due from cryptoassets would only be available at a disproportionate cost.
Decentralised Finance (also known as DeFi) is a comparatively recent innovation with notable uptake during mid-2020. Amounts arising from decentralised finance are, generally, liable to either Income Tax or Capital Gains Tax. However, as with cryptoassets, the Self-Assessment form does not separate capital gains and/or income arising from decentralised finance. As a result, a reliable estimate of Capital Gains Tax or Income Tax collected from decentralised finance would only be available at a disproportionate cost.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made, applying the Laffer curve, of the potential effect on tax revenues of a reduction in corporation tax.
Answered by Jesse Norman
The fiscal and economic impact of changes in the rate of Corporation Tax (CT) have been set out in the Office for Budget Responsibility’s (OBR’s) Economic and Fiscal Outlooks which are published alongside fiscal events.
The most recent forecast, published in March 2021, includes the revenue raised from the announcement made at Budget 2021: that the main rate will increase to 25% from April 2023, which is forecast to raise over £45 billion across the next 5 years.
This forecast incorporates adjustments to reflect behavioural responses from businesses to changes in the rate of CT.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what comparative assessment he has made of the Financial Conduct Authority's regulatory approach to (a) digital and (b) currencies; what recent assessment he has made of the potential effect of UK financial regulation of digital currencies on their development; what assessment he had made of the adequacy of the steps being taken to support new business and innovation in this area in the UK; and if he will make a statement.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The Government is committed to retaining its global leadership position in fintech and fully recognises its important role in delivering better financial services for people and businesses. The Government also believes that, in practice, this means creating a regulatory environment in which firms can innovate, while crucially maintaining the highest regulatory standards so that people can use new technologies both reliably and safely. This is essential for continuing confidence in the financial system more broadly.
On 10 January 2020, the FCA became the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for cryptoassets firms. A robust AML regime for cryptoassets will help to bolster confidence in the UK as a safe and reputable place to start and grow a cryptoasset business.
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.
The Government has also proposed several further changes to respond to cryptoassets. On 7 January launched a consultation on its regulatory approach to cryptoassets and stablecoins. This set out the view that new and emerging forms of cryptoassets, known as stablecoins, which seek to stabilise their value, could be used as widespread means of payment and potentially deliver improvements in cross-border transactions. At the same time, depending on scale and nature of use, these developments could pose similar financial stability and consumer risks as traditional regulated payment systems.
The Government is considering 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.
This measure is being consider alongside 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.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what steps he is taking to safeguard the public finances in response to the Bank of England's Monetary Policy Committee's expectation that inflation will rise above 3 per cent.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The UK has a strong monetary policy framework and the operationally independent Bank of England is responsible for inflation meeting its 2% target. The Bank of England expects the rise in inflation to be temporary, as they set out in the latest minutes of the Monetary Policy Committee, and expect it to return to its 2% target over their latest forecast.
The government’s priority is to continue to invest in the economy to support recovery from the pandemic, whilst also returning the public finances to a sustainable path once the economic recovery is durably underway. The Chancellor has highlighted that at our higher level of debt, the public finances are more vulnerable to changes in inflation and interest rates. That is why at the Budget in March, the government announced fiscal repair measures that take the public finances back toward a sustainable path in the medium term with debt broadly stable and the current budget moving close to balance.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what steps an employee can take when they have not been paid furlough by their employer, when that employer has received the Government payment under the Coronavirus Job Retention Scheme.
Answered by Jesse Norman
The scheme rules make it clear that no grant is payable if the employer is not going to abide by the requirement to pay the furloughed employee 80% of their usual monthly wage (up to a cap of £2,500). HMRC have powers to check and recover any amounts claimed where the employee has not been paid enough.
If workers are concerned they are not receiving this, they should report their employer to HMRC via the online fraud reporting tool on the Government’s website, or use HMRC’s telephone-based fraud hotline. HMRC will continue to monitor claim data, compare against records of earnings and review reports to their fraud hotline.
The Government retains the right to audit retrospectively all aspects of the scheme with scope to claw back fraudulent claims.
Asked by: Daniel Kawczynski (Conservative - Shrewsbury and Atcham)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has plans to extend business rates relief to food and drink wholesalers who supply to (a) schools, (b) hospitals, (c) care homes and the hospitality industry to mitigate against (i) businesses in that sector closing and (ii) jobs being lost as a result of the covid-19 outbreak.
Answered by Jesse Norman
The Government has provided enhanced support through business rates relief to businesses occupying properties used for retail, hospitality and leisure given the direct and acute impacts of the COVID-19 pandemic on those sectors.
A range of other measures to support all businesses, including those not eligible for the business rates holiday, such as wholesalers, has also been made available. On 8 July the Chancellor set out a package of measures to support jobs across the UK, including a Job Retention Bonus to help firms keep furloughed workers, and a new £2 billion Kickstart Scheme to create hundreds of thousands of new, fully subsidised jobs for young people. The Chancellor has also announced a cut in VAT to 5% for accommodation, attractions and the hospitality sector.