Recommendations & Conclusions
18 items
2
Recommendation
Fifteenth Report - Regulating Crypto
Accepted
It has been more than four years since our predecessor Committee’s Report called for greater regulation of the cryptoasset industry, and the FCA faces challenges in implementing existing and proposed crypto regulations. It is important that the Government and regulators strive to keep pace with developments, including by ensuring that …
Government response. The government agrees on keeping pace with crypto developments, highlighting existing AML-CTF and financial promotion regulations. It commits that HM Treasury and the FCA will work to clarify authorisation gateway standards and the FCA is increasing capacity and adopting a …
HM Treasury
3
Conclusion
Fifteenth Report - Regulating Crypto
Accepted
While we support financial innovation where there are potential benefits, the extent of the benefits cryptoasset technologies may bring to financial services in the future—and the areas in which the technologies may have the most impact— remains unclear. In the meantime, the risks posed by cryptoassets to consumers and the …
Government response. The government strongly agrees with a balanced, technology-neutral approach, acknowledging the uncertain benefits and evolving nature of cryptoassets. It reiterates its focus on regulating cryptoasset activity and clarifies that FMI sandboxes will be implemented this year to promote responsible innovation.
HM Treasury
4
Recommendation
Fifteenth Report - Regulating Crypto
Accepted
We recommend that the Government takes a balanced approach to supporting the development of cryptoasset technologies. It should seek to avoid expending public resources on supporting cryptoasset activities without a clear, beneficial use case, as appears to have been the case with the Royal Mint NFT. It is not the …
Government response. The government strongly agrees with a balanced, technology-neutral approach, confirming its current regulation-focused strategy. It commits to implementing the first FMI Sandbox this year to support responsible innovation and states the Royal Mint is not proceeding with the NFT, with …
HM Treasury
5
Conclusion
Fifteenth Report - Regulating Crypto
Accepted in Part
Regardless of the regulatory regime, their price volatility and absence of intrinsic value means that unbacked cryptoassets will inevitably pose significant risks to consumers. Furthermore, consumer speculation in unbacked cryptoassets more closely resembles gambling than it does a financial service. We are concerned that regulating retail trading and investment activity …
Government response. The government acknowledges concerns about consumer risks and the 'halo effect' in unbacked cryptoassets, stating it has implemented robust measures to ensure consumers understand the high risks involved, while maintaining its financial services regulatory approach.
HM Treasury
6
Recommendation
Fifteenth Report - Regulating Crypto
Rejected
We strongly recommend that the Government regulates retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service, consistent with its stated principle of ‘same risk, same regulatory outcome’. (Paragraph 52) Regulating Crypto 19
Government response. The government explicitly rejects the recommendation to regulate unbacked cryptoassets as gambling, stating it would be a fundamental departure from its intended approach which aligns with international standards for financial services.
HM Treasury
1
Conclusion
First Report - The digital pound: still…
Acknowledged
There are some potential benefits to the UK economy from a digital pound. A digital pound could help support innovation in domestic payments, while guarding against some of the risks posed by new forms of private digital money by maintaining public access to a form of central bank money. Innovation …
Government response. The government acknowledges the committee's observation on potential benefits, reiterating that the design process itself will foster knowledge-sharing and collaboration, which are valuable regardless of the final decision to introduce a digital pound.
HM Treasury
2
Conclusion
First Report - The digital pound: still…
Rejected
It is vital that a digital pound does not increase risks to UK financial stability and, were a digital pound to be launched, it could take some time to fully understand the impact on financial stability and the wider economy in both normal and stressed times. To reduce the risk …
Government response. The government rejects the suggestion for a lower initial holding limit, stating it is minded to proceed with a £10,000-£20,000 limit for the digital pound, while remaining open to revisiting this if new information arises.
HM Treasury
3
Recommendation
First Report - The digital pound: still…
Rejected
We recommend that the Bank of England and Treasury undertake further analysis on the monetary policy impact of paying interest on the digital pound, and in the meantime ensure that their design work does not preclude the possibility of paying interest on the digital pound.
Government response. The government rejects paying interest on the digital pound at launch, stating it is intended as a payment means and would be unremunerated like cash, though any future decision to revisit this would involve a full consultation.
HM Treasury
4
Conclusion
First Report - The digital pound: still…
Accepted
Strong privacy safeguards would be vital were a digital pound to be introduced. Although the Bank of England and Government state that it is not their intention to be able to access users’ data, it is conceivable that they may in future be tempted to try to make use of …
Government response. The government has committed to guaranteeing users' privacy in primary legislation if a digital pound is launched, aligning with the report's emphasis on strong privacy safeguards and confirming neither the Government nor the Bank would access personal data.
HM Treasury
5
Recommendation
First Report - The digital pound: still…
Accepted
We recommend that any primary legislation used to introduce a digital pound does not allow the Government or Bank of England to use the data from a digital pound for any purposes beyond those already permitted for law enforcement.
Government response. The government has committed to guaranteeing users' privacy in primary legislation if a digital pound were launched, confirming neither the Government nor the Bank would have access to personal data beyond existing law enforcement permissions.
HM Treasury
6
Conclusion
First Report - The digital pound: still…
Acknowledged
We are also concerned about potential misuse of consumers’ data by the user-facing firms that would manage consumers’ digital pound wallets, particularly given that the commercial use of this data could form a key part of the business model for wallet providers, in a way that it doesn’t for banks.
Government response. The government acknowledges concerns about private sector data misuse and states firms would comply with existing UK data protection laws, promising to explore privacy-enhancing designs and set out the regulatory framework in detail during the design phase.
HM Treasury
7
Recommendation
First Report - The digital pound: still…
Acknowledged
While some consumers may be content to share their personal data with payment interface providers in exchange for digital pound wallet services, there is a risk that consumers do not fully understand how their data could be used, or the implications of doing so. It is vital that it is …
Government response. The government acknowledges concerns about private sector data use, stating all firms would comply with existing UK data protection laws, and commits to exploring privacy-enhancing designs and detailing the regulatory framework during the design phase.
HM Treasury
8
Recommendation
First Report - The digital pound: still…
Accepted
It would be important to support financial inclusion to the greatest possible extent through a digital pound were it to be launched, including by exploring the option of offline payments to ensure accessibility by users with limited or unreliable internet connectivity.
Government response. The government has accepted the recommendation, establishing a working group to report on offline payments by year-end, and committing to conduct experiments exploring accessibility for digitally excluded users.
HM Treasury
9
Recommendation
First Report - The digital pound: still…
Accepted in Part
The Government and Bank of England must resist the temptation to believe that a digital pound can fix problems it can’t, however, and a digital pound must not make financial exclusion worse. There is a risk that the introduction of a digital pound accelerates the demise of physical cash, causing …
Government response. The government states a digital pound would complement cash and references its 2023 legislation giving the FCA powers to protect access to cash, with a new regulatory framework expected by summer 2024, but does not address digital literacy or universal …
HM Treasury
10
Recommendation
First Report - The digital pound: still…
Accepted
This report has set out some of the benefits and risks from a digital pound. While there are some potential benefits, their extent is unclear and there are significant risks and challenges to be worked through, particularly in relation to privacy and financial stability. It is not clear to us …
Government response. The government accepts the recommendation, stating that the committee's message aligns with HM Treasury and the Bank's approach to the next design phase, which will deepen understanding and build an evidence base for a decision later this decade.
HM Treasury
11
Recommendation
First Report - The digital pound: still…
Accepted in Part
The Bank of England has already incurred significant costs from its work on a digital pound, and its further work on the design of a digital pound will require increased expenditure in the coming years. It is important that the Bank of England and Treasury keep control of these costs …
Government response. The Bank acknowledges the request for transparency on digital pound costs, stating it currently reports CBDC costs within its broader fintech work, and will consider the appropriate future reporting mechanism.
HM Treasury
12
Recommendation
First Report - The digital pound: still…
Accepted
Building the infrastructure needed for a digital pound would also likely be very expensive, and the eventual decision on whether to launch a digital pound will need to be subject to a rigorous cost-benefit analysis. The Bank of England and Treasury must approach this analysis from a neutral stance—the launch …
Government response. The government agrees that a balanced, transparent, and rigorous approach, from a neutral stance, is required for the cost-benefit analysis of a digital pound, which will cover economic, societal, and financial implications.
HM Treasury
13
Recommendation
First Report - The digital pound: still…
Deferred
To help ensure a rigorous and balanced approach is taken towards assessing the case for launching a digital pound in future, we recommend that the Government and Bank of England set out in more detail, as soon as possible, the criteria they will use to inform that final decision. (Paragraph …
Government response. The government agrees to a rigorous assessment approach but states the specific criteria and wider assessment framework for launching a digital pound are still being developed as part of the design phase, promising to report on progress and engage stakeholders.
HM Treasury