Andrew Griffith letters on FSMB

The House of Commons has published a letter from Andrew Griffith on the FSM Bill dated 10 October to Tulip Siddiq and Abena Oppong-Asare. The letter followed the second reading of the Bill and addresses:

• the Government’s approach to regulating stablecoins. The letter explains that, for the time being, only stablecoins used for payment and backed by fiat currency will be regulated, and that the high volatility of other crypto assets makes them unsuitable for payment. So Treasury intends to consult on a “world-leading” regime for a wider set of crypto assets, including those primarily used for investment, later this year. It also notes that it is likely that any future CBDC (issued by a central bank, as opposed to stablecoins which are issued by a private issuer) would exist alongside cryptoassets and stablecoins.  The Government and BoE are still deciding whether to introduce a CBDC in the UK and will also consult on that later this year;
• on illicit activity and misleading promotions of crypto assets, the letter notes what is already required under the AML regime, and that the government has already committed to ensuring certain cryptoassets will be within the scope of financial promotion regulation. It feels that and the proposals in the Economic Crime and Corporate Transparency Bill will address the issues;
• the need for BNPL regulation. The letter notes that the government will be consulting on draft legislation before the end of 2022, and then the FCA will be able to consult on its rules.  The letter notes that it is important to ensure the regulatory regime appropriately protects consumers without creating any unintended consequences that will prevent them from making use of low cost credit;
• credit unions and mutuals: the letter promises support for the sector;
• mortgage prisoners: The letter notes the extensive work already carried out by FCA and the commitment to ensuring lenders treat borrowers fairly, but recognising there is no easy solution to this issue;
• reducing the poverty premium: the letter reinforces the government’s commitment that all consumers should have access to suitable insurance; and
• in response to concerns on whether speculation on food and energy prices could result from changes to MiFID. The government will continue to allow permission limits, set by exchanges within a framework set by FCA.

Mr Griffith also wrote to Andrea Leadsom on how crypto asset regulation interacts with fiat currency regulation. He explained that the immediate intention (as above) is to regulate stablecoins used for payment that are backed with fiat currency, and to regulated them in a similar way to other forms of payment. He also outlined plans for investor protection and greater regulation of cryptoasset promotions. The letter goes on to explain the government’s commitment generally to making payments systems more robust, with mandatory COP and other initiatives, and how cheques are now easier to cash in as banks more widely use cheque imaging. It also addresses financial education initiatives in schools, how the Government is supporting the credit union sector through proposals in the Bill and assured her the Government appreciates the importance of MRAs and that any proposed MRAs will be subject to parliamentary scrutiny.