Ministers Launch Crypto APPG
Lawmakers in the UK have established a cross-party group focused on discussing issues related to cryptocurrency and its potential regulation. The Crypto and Digital Assets Group will be chaired by SNP MP Lisa Cameron and has been backed by the trade association CryptoUK. The popularity of cryptocurrency and NFTs have risen dramatically in recent years, with the launch of diverse products such as football trading cards and fan tokens.
The rise of crypto could bring benefits to the UK economy, but it also poses risk to consumers if not effectively regulated.
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Regulating Crypto
Members of parliament and the House of Lords have joined to launch the Crypto and Digital Assets Group, with a view to creating a forum to discuss the challenges and opportunities facing the sector. As the popularity of crypto and digital assets continues to grow, lawmakers are keen to negotiate ways of regulating the market.
According to Dr Lisa Cameron, who will chair the APPG, members will work together to ensure that new rules support innovation in the digital assets industry. Cameron is the SNP MP for East Kilbride, Strathaven and Lesmahagow. The group has also expressed its commitment to protecting consumers from crypto scams and unregulated companies.
According to data collected by Chainanalysis, cryptocurrency scams have cost investors around the world $7.8 billion in the last year alone. While the proportion of crypto used for illicit purposes is growing year on year, the overall growth of the digital assets market has exceeded the increase in scams.
In the UK, figures reported by the Financial Conduct Authority show that 3 million adults now own some form of cryptocurrency. Around the world, governments and regulators are racing to pin down their own approaches to crypto regulation. The Crypto and Digital Assets Group will bring together industry stakeholders and policymakers to examine challenges to regulations and policy.
The Westminster group is supported by CryptoUK, a digital asset trade association. For the last year, CryptoUK has been lobbying lawmakers to recognize the potential benefits of digital assets to the British economy. It represents many of the industry’s companies operating in the UK, including Crypto.com and eToro.
CryptoUK will act as the APPG’s secretariat and has already spent just under £50,000 to back the group. Announcing the launch of the cross-party group, CryptoUK said that it aims to work constructively with group members and the industry to advance the UK’s approach to regulation of the sector.
Divisive Issues
In the US, the issue of regulating cryptocurrency has already proved divisive. The sector has lobbied hard against legislative proposals, including last August’s Senate infrastructure bill, which detailed new tax requirements for crypto transactions. That plan was estimated to raise nearly $30 billion for the Treasury but has been heavily criticized by investors.
In the UK, the crypto sector has openly accused the government of being too slow in establishing rules for digital asset businesses. This poses the risk of companies moving offshore, making them harder to regulate and causing a potential loss to the Treasury.
In October 2020, the Financial Conduct Authority announced its intention to ban crypto derivatives for retail investors, claiming that they had “no reliable basis for valuation”. The ban came into effect a year ago and is slated to save retail investors around £53 million a year in losses and fees.
The FCA has also opposed crypto funds, such as the bitcoin ETFs available in the US. That approach seems to have been proved a wise one, as the ProShares Bitcoin Strategy ETF is now one of the ten worst performers, despite recording the most successful launch ever in October 2021.
Former UK chancellor Philip Hammond has said that the UK needs to embrace financial innovation if it wants to compete with other markets post-Brexit. He cited nations such as Switzerland, Singapore and Germany as all moving faster than the UK on welcoming crypto and digital assets. Since leaving the Treasury in 2019, Hammond has become an advisor to crypto trading firm Copper.co.
Speaking to the Financial Times, Dr Cameron explained why time is of the essence for the UK government to examine its approach to cryptocurrency and digital assets. While the sector’s growth could pave the way for an array of economic benefits, the rate of its expansion could also cause harm to consumers. She stated:
“We are at a crucial time for the sector as global policymakers are also now reviewing their approach to crypto and how it should be regulated.”
Football Turns to NFTs
The APPG has already set out some of its top priorities for discussion. It will examine what an effective regulatory framework for the sector could look like while taking into account approaches adopted by other countries. It will also look at the policies created by the UK government and regulators so far.
Other issues that the APPG will analyze include crime, how to protect consumers from scams, advertising, international trade, education, innovation, environmental concerns and the future of digital payments. It is also expected that it will look at the FCA’s money laundering registration rules for crypto firms, alongside the outcomes of two policy consultations on crypto advertising and stablecoins.
Dr Cameron told the Financial Times that finding the best ways to protect consumers should be a top priority for the government and regulators. She has called for clearer rules on advertising and registering crypto companies, in order to safeguard consumers from losses and to offer UK firms more certainty.
Joining Dr Cameron in the APPG are a number of other well-known ministers. Former digital economy minister Ed Vaizey is a member of the group, as is conservative MP Harriett Baldwin. The Crypto and Digital Assets Group was officially registered with parliament at the beginning of January.
It has been reported that ministers are weighing up a crackdown on cryptocurrencies and NFTs, in response to concerns that they could be harmful to young people. The rise of such digital assets has been rapid and has already seen a number of controversial cases, like the collapse of Football Index, in which consumers have lost out.
Last October, the Gambling Commission warned consumers to be wary when using Sorare’s fantasy football platform. The site offers collectable NFT trading cards, which are stored on Ethereum blockchain. Sorare denies that its football cards constitute gambling and is one of a growing number of platforms offering risky, unregulated products.
