The value of crypto assets has plummeted in recent weeks, highlighting the risks of investing in them. Last week, the Times reported that HMRC research found that about 6.7 million adults in the UK owned or have bought crypto assets. This is significantly higher than estimates from the FCA, which said that 2.3 million adults held crypto assets at the start of 2021.
The House of Commons Treasury Select Committee has now launched an inquiry examining the potential risks and opportunities associated with the use of crypto assets, their impact on social inclusivity and the possible need for regulatory change in the future.
The inquiry will cover:
- The role of crypto assets in the UK, including the opportunities and risks that crypto assets may bring to consumers, businesses and the UK government (and associated bodies).
- The potential impact of distributed ledger technology on financial institutions, including the central bank, and financial infrastructure
- The regulatory response to crypto assets from the UK government, the FCA and the Bank of England, considering how regulation could be balanced to provide adequate protection for consumers and businesses without stifling innovation.
The Committee has asked for views about the following issues:
- To what extent are crypto assets when used as digital currencies (such as stablecoin) likely to replace traditional currencies?
- What opportunities and risks would the introduction of a Bank of England digital currency bring?
- What impact could the use of crypto assets have on social inclusion?
- Are the UK government and regulators suitably equipped to grasp the opportunities presented by crypto assets, whilst at the same time mitigating against the risks?
- What opportunities and risks could the use of crypto assets, including NFTs, pose for individuals, the economy, and the workings of both the public and private sectors?
- How can distributed ledger technology be applied in the financial services sector?
- What work has the UK government (and its associated bodies) done to understand, prepare for and, where relevant, encourage changes that may be brought about by increased adoption of crypto assets?
- How might the government’s processes, eg the tax system, adapt, if crypto assets are adopted more widely?
- How effective have the regulatory measures introduced by the government, for instance around advertising and money laundering, been in increasing consumer protection around crypto assets?
- Is the government striking the right balance between regulating crypto assets to provide adequate protection for consumers and businesses and not stifling innovation?
- Could regulation benefit crypto asset start-ups by improving consumer trust and resilience?
- How are governments and regulators in other countries approaching crypto assets, and what lessons can the UK learn from overseas?
- The environmental and resource intensity of using crypto asset technology.
The inquiry ends on 12 September 2022.
Crypto assets have the potential to bring new and innovative changes to the UK financial system, the economy and broader society. However, there are also significant concerns around their use to launder funds, purchase illegal products, and evade international sanctions