City minister says UK crypto regulations unlikely to be ready in 2023

City minister Andrew Griffith said regulations for digital currencies are unlikely to be ready in 2023, as he reaffirmed the government’s aim to be “the home of well-regulated [and] technologically-advanced financial systems”. 

In a wide-ranging Treasury committee hearing today, Griffith was quizzed by MPs on the risks facing the crypto industry and the potential for the UK to lead on crypto regulation. 

Setting out the government’s strategy, Griffith said they would be coming forward “in weeks” with two public consultations: one on the general regulatory approach to crypto assets and one on Central Bank Digital Currencies (CBDCs). 

“I think we should all be humble about our ability to predict future technologies but it would be wrong for the UK not to be forward leading to seek to make the most of the opportunity,” he said. 

However, Griffith admitted that “we’re probably not going to be legislating in 2023”. 

“I don’t accept the implied criticism that by spending time with the industry at this stage, that we’re doing anything wrong”, he said, although he accepted a range of risks facing the sector. 

Those risks have become increasingly prominent since April 2022 last year, when then Chancellor Rishi Sunak expressed his wish for the UK to be a “global crypto assets hub”.

A series of high-profile collapses last year, culminating in the insolvency of FTX, led many to doubt the future of the industry.

Reflecting these concerns, the City minister was reluctant to say whether he was pleased or concerned that 2.3 million people in the UK own some form of crypto asset, after he was pressed by Labour MP Emma Hardy. 

“What would please me”, Griffith said, “is if all of those 2.3 million have gone into purchasing – what are likely to be today – speculative crypto assets with a good understanding of the risk… and an understanding of the consequences if that speculative investment doesn’t deliver for them.”

Citing FCA figures, Laura Mountford, Deputy Director, Payments and Fintech at the Treasury – who was at the hearing alongside Griffith – said around 40 per cent of the 2.3 million people that have invested in crypto currencies already understood that “they are purchasing crypto assets as a gamble.”

Griffith was also concerned at the potential for regulation to create a “halo effect” around crypto assets that appear to be safer than they actually are, such as FTX. “That is a big concern, and it is one reason why we are taking our time and trying to get the balance right,” he said. 

On CBDCs, Griffith said that it remains an “if not a when.”

“We’re not fully into the inevitability of doing this,” he said.

Griffith said he would “rather be right than first” despite the progress made on CBDCs in China, USA and Europe.