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 …
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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 in unbacked cryptoassets as a financial service will create a ‘halo’ effect that leads consumers to believe that this activity is safer than it is, or protected when it is not.
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Government response AI summary
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.
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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 …
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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 difficulties for those currently reliant on it. It is vital that efforts continue to be made to support those reliant on physical cash. It is also vital that the Government works to improve digital literacy and inclusion in the UK. The Government and regulators must ensure that any future digital pound wallet providers grant access to at least basic digital pound services for all UK adults. (Paragraph 53) Future decision on whether to launch a digital pound
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Government response AI summary
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 access to digital pound services.
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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 …
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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 to avoid spending more than necessary on a digital pound that might not proceed to being built. To ensure transparency around the costs incurred, we recommend that the Bank of England reports expenditure on the digital pound as a separate line item in its annual report and accounts from 2024 onwards.
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Government response AI summary
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.
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HM Treasury