During a UK parliamentary hearing yesterday, Treasury Economic Secretary and City Minister Andrew Griffith outlined the regulatory agenda for the crypto-asset sector and Her Majesty’s Treasury’s stance towards the industry.

The Minister outlined three issues that should be addressed by legislation in 2023. This includes the regulation of stablecoins in the Financial Services and Markets (FSM) Bill, which is expected to pass around April. We wrote a separate article about his discussion of wholesale stablecoins and central bank digital currency.

The FSM bill also includes enabling the FMI Sandbox for financial markets infrastructures, which as previously reported will start with DLT-based securities settlement systems.

A third theme is the promotion of crypto assets, where the Treasury plans to introduce legislation this year to include cryptocurrencies as part of the promotion of financial services to improve consumer protection.

Two consultations on central bank digital currency (CBDC) and broader regulation of crypto assets will be launched in the coming weeks. However, comprehensive crypto legislation is not expected to be introduced this year.

The Government wants to avoid the “foreclosure of the future”

Griffith wanted the government to not hesitate to guess which technologies will gain ground. Given the nascent nature of blockchain and cryptocurrencies, he is reluctant to push through comprehensive legislation at this stage. He is interested in balancing consumer protection with the support of innovation.

Asked if he was bothered that 2.3 million people in the UK have become involved in speculative cryptocurrency, the minister said the issue is how well they understand the risks.

Treasury’s Laura Mountford added that the FCA estimated that 40% of investors knowingly buy crypto assets as a gamble. So a significant proportion is aware of the risks, and the goal is to scale up that.

The minister said it reminded him of the “president of the Michigan Savings Bank (who) told Henry Ford’s lawyer: ‘the horse is here to stay, but the automobile is just a novelty, a fad'”. Therefore, Griffith does not want to “run the future”.

He winked at Europe’s MiCA legislation, but noted that it does not cover decentralized finance (DeFi), while the UK plans to include DeFi when it finally proposes legislation.

Institutional DLT Apps Hobbyist

Griffith spoke about blockchain back-office and intermediary opportunities, including “keeping records and ledgers in a way that is more resilient than a central repository, that offers atomic settlement time, that cuts out middlemen. And often when we think about financial risk, it’s the intermediaries, whether it’s a clearing house or a counterparty, that’s where the risk is.”

He mentioned that disruptive technology “often opens up new sectors, new opportunities that we all find quite difficult to forecast as we are here today.” Therefore, he added that he does not see a future DLT as inevitable, but said that it is necessary to be open to the possibilities.