Asked by: Kevin Brennan (Labour - Cardiff West)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent discussions he has had with (a) the Secretary of State for Digital, Culture, Media and Sport, (b) the Gambling Commission and (c) the Financial Conduct Authority on the regulation of crypto-based products and services.
Answered by Richard Fuller
Treasury Ministers and officials have meetings with a wide variety of organisations in the public and private sectors as part of the process of policy development and delivery.
The Cryptoasset Taskforce, comprising HM Treasury, the Bank of England, the Financial Conduct Authority (FCA), and the Payment Systems Regulator (PSR), continues to monitor ongoing development in cryptoasset markets, and is taking forward a range of regulatory measures to mitigate market integrity risks, protect consumers and support innovation in the cryptoasset market.
Since January 2020, cryptoasset firms operating in the UK have been subject to the Money Laundering Regulations. To protect consumers, on 18 January 2022, the government set out its intention to legislate later this year to bring certain cryptoassets into financial promotion regulation. This would ensure that relevant cryptoasset promotions are held to the same high standards for fairness, clarity and accuracy that exist in the financial services industry. Additionally, on the 20 July, the government introduced the Financial Services and Markets Bill, which includes a measure allowing HM Treasury to bring stablecoins, where used as a means of payment, within the UK regulatory perimeter.
The government has committed to consult later this year on the broader regulation of cryptoassets.
Asked by: Pat McFadden (Labour - Wolverhampton South East)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, which industry stakeholders his Department met with ahead of the 4 April 2022 announcement on the regulation of crypto-assets.
Answered by Richard Fuller
Treasury Ministers and officials have meetings with a wide variety of organisations in the public and private sectors as part of the process of policy development and delivery.
Details of ministerial and permanent secretary meetings with external organisations on departmental business are published on a quarterly basis and are available at: https://www.gov.uk/government/collections/hmt-ministers-meetings-hospitality-gifts-and-overseas-travel.
Asked by: Adam Afriyie (Conservative - Windsor)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 13 June 2022 to Question 11630 on Cryptocurrencies: Regulation, what assessment he has made of the (a) adequacy of existing skills and qualifications and (b) requirement to acquire further skills of brokers who (i) are already regulated and compliant with Money Laundering Regulations and (ii) do not intend to custody cryptoassets themselves but instead use a registered cryptoasset firm.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
It is the responsibility of the FCA to assess whether cryptoasset firms have appropriate anti-money laundering controls.
As part of this assessment, firms must demonstrate they have the necessary skills and qualifications. Firms must also demonstrate they have proper policies and procedures in place to deal with the specific nature of the cryptoasset ecosystem. Where either is assessed to be below the required standard, they may have their application rejected or refused.
The Money Laundering Regulations established a risk-based approach to the supervision of cryptoasset businesses. The assessment which each firm must undergo is therefore proportionate to the risks generated by the kind of activities firms engage in.
This means that whether the broker holds cryptoassets themselves or uses a registered cryptoasset firm, the skills & procedures required will likely be different from those that a large cryptoasset exchange is expected to demonstrate.
Asked by: Damien Moore (Conservative - Southport)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he plans to introduce regulation on (a) cryptocurrencies and (b) other decentralised financial assets in the UK.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The UK is committed to creating 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 Government has already taken forward a series of regulatory measures to protect consumers, manage market integrity risks and support innovation. Since 2020 the FCA has been the anti-money laundering supervisor for cryptoasset firms. In January 2022 the Government confirmed the intention to bring certain cryptoassets into the scope of the Financial Promotion Order to ensure that cryptoasset promotions are fair, clear, and not misleading.
On April 4 the Government published its response to its 2021 consultation on the UK’s regulatory approach to stablecoins. It also included a call for evidence on the use of Distributed Ledger Technology (DLT) in financial markets. The legislation to bring stablecoins, where used as a means of payment, within the regulatory perimeter is expected to be part of the forthcoming Financial Services and Markets Bill announced in the Queen’s Speech on 10 May. The Bill will be introduced later in the session when parliamentary time allows.
Further, the Government considers that some cryptoassets may already fall within the relevant UK legal frameworks. However, this also depends on the structure of the token and nature of the activities concerned.
At Fintech Week 2022, the Government announced its commitment to consult on a world-leading regime for a broader set of cryptoasset activities this year.
Asked by: Baroness Kennedy of Cradley (Labour - Life peer)
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.
Answered by Baroness Penn - Minister on Leave (Parliamentary Under Secretary of State)
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.
Asked by: Alexander Stafford (Conservative - Rother Valley)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has had discussions with representatives from the UK banking sector on ensuring that reputable and regulated digital asset companies can secure business bank accounts in the UK.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The government set out at Fintech Week our firm ambition to make Britain a global hub for cryptoasset technology and investment. The government wants to ensure firms can invest, innovate and scale up in this country. And the government have announced a number of reforms which will see the regulation and aspects of tax treatment of cryptoassets evolve – our clear message to cryptoasset firms is that the UK is open for business.
These include committing to consult on a future regulatory regime later this year; legislating to bring stablecoins into payments regulation; setting up a ministerial-chaired Cryptoasset Engagement Group, bringing together key figures in industry; working with the Royal Mint to create a Non-Fungible Token; and exploring ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market in the UK.
HM Treasury holds regular discussions with the Financial Conduct Authority (FCA) on a range of issues regarding the regulation of financial markets, including cryptoassets.
The government established a Cryptoassets Taskforce in 2018, consisting of HM Treasury, the Bank of England, the Payment Systems Regulator (PSR) and the FCA. The Taskforce’s objectives include exploring the impact 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.
The decisions about what products are offered, including commercial accounts, and to whom remain commercial decisions for banks and building societies.
Asked by: Alexander Stafford (Conservative - Rother Valley)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has had recent discussions with Financial Conduct Authority on steps to create a conducive operating environment for cryptoasset companies in the UK.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The government set out at Fintech Week our firm ambition to make Britain a global hub for cryptoasset technology and investment. The government wants to ensure firms can invest, innovate and scale up in this country. And the government have announced a number of reforms which will see the regulation and aspects of tax treatment of cryptoassets evolve – our clear message to cryptoasset firms is that the UK is open for business.
These include committing to consult on a future regulatory regime later this year; legislating to bring stablecoins into payments regulation; setting up a ministerial-chaired Cryptoasset Engagement Group, bringing together key figures in industry; working with the Royal Mint to create a Non-Fungible Token; and exploring ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market in the UK.
HM Treasury holds regular discussions with the Financial Conduct Authority (FCA) on a range of issues regarding the regulation of financial markets, including cryptoassets.
The government established a Cryptoassets Taskforce in 2018, consisting of HM Treasury, the Bank of England, the Payment Systems Regulator (PSR) and the FCA. The Taskforce’s objectives include exploring the impact 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.
The decisions about what products are offered, including commercial accounts, and to whom remain commercial decisions for banks and building societies.
Asked by: Adam Afriyie (Conservative - Windsor)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will allow UK FCA regulated firms, such as brokers, to be exempt from the FCA Cryptoasset Register as they already have equivalent approved processes in place.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
Under the Money Laundering Regulations (MLRs), any firm operating as a cryptoasset exchange provider or custodian wallet provider must be registered with the FCA for anti-money laundering supervision as a cryptoasset business. It is the responsibility of the FCA, as the independent supervisor for these firms, to assess whether firms have appropriate anti-money laundering controls in place for the kinds of activity they carry out, prior to admitting them to the register. There is no statutory exemption to this requirement for firms that are already registered with the FCA for another activity.
It is necessary for firms dealing with cryptoassets to demonstrate that their controls are adequate to deal with the specific nature of the cryptoasset ecosystem. Having adequate AML controls for one type of business activity does not guarantee that these controls are suitable for another.
The government is committed to supporting the safe and sustainable growth of the cryptoasset sector. The MLRs established a risk-based approach to the supervision of cryptoasset businesses, and the assessment which each firm must undergo should therefore be proportionate to the risks generated by the kind of activities it engages in. The processes that a broker is expected to put in place will therefore likely be different from those that a large cryptoasset exchange is expected to demonstrate.
Asked by: Adam Afriyie (Conservative - Windsor)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the implications for his policies of the FCA’s decision to classify cryptoassets as a restricted mass market investment.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
In January 2022 the government published a response to its consultation on a proposal to bring certain cryptoassets into the scope of the Financial Promotion Order to ensure that cryptoasset promotions are fair, clear, and not misleading.
The forthcoming legislation, and supportive FCA rules, will regulate in-scope cryptoasset financial promotions. This is aimed at improving consumers’ understanding of the risks and benefits associated with cryptoasset purchases and ensuring that cryptoasset promotions are held to the same standards as similar risk financial services products.
The FCA’s consultation on its rules closed in March 2022 and it is currently considering representations from firms.
Asked by: Alun Cairns (Conservative - Vale of Glamorgan)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what progress he has made on developing regulations for cryptocurrency.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The government has taken forward a series of regulatory measures to protect consumers, manage market integrity risks and support innovation. Since 2020 the FCA has been the anti-money laundering supervisor for cryptoasset firms. In January 2022 the government confirmed the intention to bring certain cryptoassets into the scope of the Financial Promotion Order to ensure that cryptoasset promotions are fair, clear, and not misleading.
Further, the government considers that some cryptoassets may already fall within the relevant UK legal frameworks. However, this also depends on the structure of the token and nature of the activities concerned.
At Fintech Week, the government set out the firm ambition to make Britain a global hub for cryptoasset technology and investment. We want to ensure firms can invest, innovate and scale up in this country. And we have announced a number of reforms which will see the regulation and aspects of tax treatment of cryptoassets evolve.
These include committing to consult on future regulation of a broader set of cryptoasset activities later this year; legislating to bring stablecoins into payments regulation; setting up a ministerial-chaired Cryptoasset Engagement Group, bringing together key figures in industry; working with the Royal Mint to create a Non-Fungible Token; and exploring ways of enhancing the competitiveness of the UK tax system to encourage further development of the cryptoasset market in the UK.
These commitments are in line with our 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.