Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made of the (1) safety, and (2) security, of cryptocurrencies.

In April the Government announced a number of specific reforms to strengthen cryptoasset regulation, including a commitment to bring stablecoins into payments regulation, and to consult on a wider cryptoasset regulatory regime later this year. The Government has also announced forthcoming legislation which, along with supportive Financial Conduct Authority (FCA) rules, will regulate in-scope cryptoasset financial promotions, requiring them to be fair, clear and not misleading for consumers. The Government has taken action to mitigate the illicit finance risks associated with cryptoassets. All cryptoasset firms in the UK must now be registered for supervision by the Financial Conduct Authority. As a part of this process, cryptoasset firms must demonstrate systems, controls, policies and procedures adequate to deal with the particular risks of the cryptoasset market and any officers, managers and beneficial owners must be fit and proper.

These commitments are in line with the Government’s objectives to create a regulatory environment in which firms can innovate, while crucially maintaining financial stability and regulatory standards so that people can use new technologies both reliably and safely. The Cryptoasset Taskforce – HMT, the Bank of England, and the FCA – continues to monitor ongoing development in cryptoasset markets closely.

Volatility is a characteristic of certain cryptoassets. The FCA and Bank of England have warned that cryptoassets are high risk investments, and that investors should be prepared to lose all of their money.

The Bank of England’s Financial Policy Committee (FPC) has recently noted that direct risks to the stability of the UK financial system from cryptoassets are limited, and that crypto technologies are growing and becoming more interconnected with the core financial system.