Bitcoin: Labour government would regulate cryptocurrency, party confirms
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An official confirmed that the under-fire digital finance sector “does need to be a regulated market” at the party’s business conference. This would be a marked change from the government’s current policy of making the UK a global crypto hub, despite its troubles.
Rachel Reeves met with a number of crypto-firms at the World Economic Forum in Davos, including exchange Coinbase which last year was forced to pay out $100 million due to money-laundering compliance failures.
She posted to X (Twitter) saying: “The next Labour government will work with the tech sector to bring jobs and prosperity to Britain.” The Shadow Chancellor was criticised by campaign groups, who described the event as “extremely concerning”.
However today (1 February), Labour confirmed to NationalWorld that it will seek to regulate cryptocurrency. A spokesman said: “It does need to be a regulated market, so we’re clear about that.” On Reeves’ meeting, he said: “If you want to bring about regulation you need to talk to those businesses but she’s very clear it does need to be a regulated market.”
In her keynote speech to the Labour Business Conference, Reeves said: “Britain’s history is as a great enterprising, innovating country. That can be our future too. Together, we can achieve great things, stand tall in an age of insecurity, and power ahead in new and growing industries unimaginable just a generation or two ago.”
Simon Youel, head of policy and advocacy at Positive Money, told NationalWorld: "While crypto-assets like so-called 'stable-coins' might seem irrelevant to most people, unless regulated properly they risk disrupting our ability to trust that a pound is always worth a pound, which the stability of not just the financial system but our entire economy relies. The problem with 'talking to business' is that business is lobbying for the Bank of England to water down regulation for crypto-assets including stable-coins."
In recent years, the government has sought to position the UK as a “global hub for crypto-asset technology,” but the sector was rocked by the collapse of high-profile exchange FTX, the jailing of Sam Bankman-Fried and is now facing intensified scrutiny. This enthusiasm for crypto in the face of significant setbacks and differing regulatory approaches elsewhere, particularly in the US, has prompted questions from campaigners.
Last year, the Treasury Select Committee recommended crypto trading should be regulated like gambling, due to the volatility and potential for significant losses. Bitcoin, the main cryptocurrency, has fluctuated significantly, rising by 70% in January after an SEC ruling before dropping again by 12%. The report also highlighted it is associated with criminal activities such as fraud and money laundering.
Kathryn Westmore, senior research fellow at The Royal United Services Institute, previously told NationalWorld that the UK’s regulatory approach to crypto as “one of collaboration between policy makers and the industry” which is very different to the US, and said the UK had not followed the recommendations of the select committee report.
She said: “The approach that the UK has taken seems to have been welcomed by the industry; the Treasury Select Committee’s recent report which suggested a different model of regulation, treating crypto in the same way as gambling, was widely rejected by the industry.” Westmore stressed the need for robust regulation, given the potentially harmful applications for crypto technologies.
She added: “While the percentage of illicit activity is minimal when looking at the overall crypto transaction activity, appropriate safeguards need to be put in place to restrict heightened abuse. There is clear evidence of the malicious uses of crypto from hacks carried out by persistent state actors, laundering of funds by organised crime groups, and an abundance of scams relating to crypto-assets.”
The Prime Minister has also met with a number of crypto-investment firms, including Andreessen Horowitz - also known as ‘a16z’ - twice in December 2021. A16z chief Sriram Krishnan also met Reeves at Davos.
The firm later took part in a further industry roundtable in November 2022 with Andrew Griffith, who was leading the government’s efforts to develop the crypto sector until he was reshuffled late last year. Griffith also has a financial stake in a company with investments in the crypto and Web3 sector - the name given to products and services linked to Blockchain technology, of which crypto assets are a major part.
Last year, after a16z announced it would open its first overseas office in London, with further plans for a “crypto startup school” in 2024, Sunak shared his support for the venture on Twitter, prompting a wave of positive reactions from crypto enthusiasts.
The US in particular has embarked on a major crackdown on crypto companies in the last 12 months, with charges brought by the Securities and Exchange Commission (SEC) against two of the industry’s leading firms, Binance and Coinbase. Both companies have been involved with lobbying the UK government in recent years. A16z was an early investor in Coinbase.
Last year, Coinbase agreed to pay out $100 million (£82m) to settle a complaint from the New York State Department of Financial Services, after an investigation found that the company’s anti money laundering systems had left the exchange “vulnerable to serious criminal conduct”. The crypto firm had to pay a fine of $50 million to New York State, and invest $50 million in compliance measures.
Chief legal officer at Coinbase, Paul Grewal said the company “has taken substantial measures to address these historical shortcomings and remains committed to being a leader and role model in the crypto space”.
The day before Reeves’ meeting in Davos, a court case opened in the US, with the SEC alleging that Coinbase is ignoring its rules. It sued the crypto-exchange last July. Earlier this month, SEC chairman Gary Gensler said: “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
Ralph Blackburn is NationalWorld’s politics editor based in Westminster, where he gets special access to Parliament, MPs and government briefings. If you liked this article you can follow Ralph on X (Twitter) here and sign up to his free weekly newsletter Politics Uncovered, which brings you the latest analysis and gossip from Westminster every Sunday morning.