The UK remains committed to becoming a global hub for the crypto industry despite recent negative events in the market. It’s “the sector I’ve spent the most time on,” MP and HM Economic Secretary Andrew Griffith told a meeting of the UK Parliament’s Treasury Committee on January 10, underscoring that commitment.
The introduction of a wholesale stablecoin and the Financial Market Infrastructure (FMI) sandbox will be the next steps in the process. These elements are included in the Financial Services and Markets (FSM) Bill, which will also pass second reading in the House of Lords on January 10.
A stablecoin will likely serve as the “first use case for what is likely to be a wholesale settlement coin” in the “long term” leading to the potential introduction of a central bank digital currency (CBDC) , said Griffith.
Griffith defended the work being done on the stablecoin, saying the stablecoin is “here now” and therefore needs immediate attention and noting that it is unclear whether a CBDC would move private stablecoins into the market if a CBDC was introduced.
A UK retail CBDC, if introduced, would be an anonymised and intermediary platform by design, Griffith said.
An advisory paper on the CBDC will be released “in weeks, not months,” followed by another on crypto regulation more broadly. The government will also host at least six roundtables with the crypto industry this year.
It is “not the government’s position that this [crypto-based technology] is inevitable,” Griffith said, but added that current technology cannot solve financial industry problems such as settlement time “in a disruptive way” like blockchain technology can.
The @CommonsTreasury Survey at #Cryptoassets continues today with another oral testimony session. This time including MP Andrew Griffith, Economic Secretary.#crypto #cryptoregulation #cryptoinvestigation
— CryptoUK (@CryptoUKAssoc) January 10, 2023
For retail users, Griffith has drawn a clear line between crypto as an investment and as a means of payment. Unbacked cryptocurrency may or may not “find a role in the market,” Griffith said.
Crypto-based payment methods are an issue for digital and financial inclusion, but “there is a very strong commitment to continued use and access to cash,” in which banks continue to have a place. Griffith said:
“Removing this middleman, certainly given current market developments, seems very premature.”
The FSM bill, which could “be done by Easter”, will also allow some new payment apps to be licensed in the IMF sandbox and introduced to the market. Use cases for crypto-based wholesale fintech may be in ledgers and “middle office” ledgers for now, Griffith said.
Full regulation of crypto asset markets will not be achieved in 2023, Griffith assured a committee member. The legislation will respect the “same asset, same regulation” principle.
In the meantime, monitoring crypto promotions plays an important role in protecting consumers. Consumers can look for the Financial Conduct Authority (FCA) logo on promotions to know they are dealing with a regulated organization. The Treasury’s deputy director of payments and fintech, Laura Mountford, told the committee.
Regardless, only around 40% of consumers “understand or view buying crypto assets as a gamble,” Mountford said, citing FCA oversight.