Question to the HM Treasury:

To ask Her Majesty's Government whether regulated securities such as equity and debt are classified as digital assets; and what consideration they have given to the possible future use of such securities as a mechanism of fundraising.

The regulatory treatment of a particular asset or instrument depends on its structure, the rights attached to it and how it is used in practice.

The FCA set out in its 2019 perimeter guidance that certain digital assets have characteristics which mean they are the same as or akin to traditional instruments like shares, debentures or units in a collective investment scheme.

Such assets are therefore within the scope of FCA regulation, and it is the responsibility of firms that use them to ensure they are meeting relevant regulatory requirements.

The Government is taking forward various initiatives in this space. The Government’s response to the Call for Evidence on the Investment and Wholesale uses of Cryptoassets published earlier this year made clear that legislation should be technology-neutral and able to accommodate innovation – such as distributed ledger technology – that could more easily enable the transfer of assets. The Government also set out its plans for a Financial Market Infrastructure Sandbox, which could enable firms to test the use of digital technologies in financial markets.

As announced by the Economic Secretary on 4 April, the Government will also be undertaking a programme of work to explore the possibilities for applying distributed ledger technology to the debt issuance process.

Separately, the Law Commission has been tasked by Government to make recommendations for private law reform to ensure that private law is capable of accommodating certain digital assets, including cryptoassets, and to clarify their legal status as objects of property rights.