Recommendation 25

HM Government Acknowledged

The government notes the committee’s assessment that there is both opportunity and risk that comes with innovation. With respect to stablecoins, the government set out its intention in April 2022 to bring stablecoins, where used as a means of payment, into the UK regulatory perimeter. The government is taking steps to put in place this regulatory structure for stablecoin used for payment through the clauses 21 and 22, and Schedule 6, of the FSM Bill, which create a framework for the regulation of digital settlement assets. Additionally, it is the government’s intention to consult later this year on regulating a wider set of cryptoasset activities, in view of their continued growth and uptake worldwide. The government has already taken action to respond to pressing risks in the sector, including through the introduction of an AML/CTF regime for cryptoasset firms, and has confirmed its intention to legislate to regulate cryptoasset financial promotions. In addition, the government is currently consulting on the adequacy of the regulatory perimeter for payments.2 This explores in particular the extent to which the Bank of England should be given more responsibility to supervise systemically important firms across the whole payment chain (where today the Bank of England is responsible only for the systemic supervision of payment systems and associated service providers thereto). The government has indicated that the increasing use of digital payments and innovation in payment chains, which have resulted in payments activities no longer being conducted primarily by banks and payment systems, mean it is the government’s view that other firms have the potential to become systemically important firms in payment chains and may warrant Bank of England supervision. The Treasury is also working closely with the Bank of England, via the central bank digital currency (CBDC) Taskforce, to assess the potential opportunities and risks that could arise from a CBDC. The government has committed to issue a public consultation on a potential UK CBDC jointly with the Bank of England during 2022. More widely, there are other steps that the government is taking with respect to protecting consumers through the FSM Bill. This includes provisions to ensure that the UK has a legislative framework to protect access to cash (see section 47 and Schedule 8), which will become a new responsibility of the Financial Conduct Authority. Clause 62 of the FSM Bill will require the Payment Systems Regulator to take action in relation to authorised push payment fraud, in order to provide for more consistent and comprehensive reimbursement to victims of these scams. Clause 20 of the Bill requires authorised firms to be assessed by the FCA before they can approve financial promotions for unauthorised firms. This will reduce the risk of consumer harm that can arise from poor quality financial promotions.