On 9 July 2024, following the general election which saw the Labour Party being returned to government for the first time in 14 years, Tulip Siddiq MP was confirmed as the new Economic Secretary to the Treasury (EST). As part of this role, she will be responsible for leading the government’s vision on financial services policy.
Having been the shadow EST since December 2021, Tulip Siddiq is no stranger to the digital assets space and has since 2022 been calling for increased regulation to prevent illicit crypto activity and to crackdown on the “crypto Wild West”, while recognising the potential opportunities offered by distributed ledger technology (if properly regulated). It is also worth noting that in 2023, Tulip Siddiq as shadow Economic Secretary raised concerns around the temporary exemption in the UK’s financial promotions regime for crypto businesses already registered with the FCA under anti-money laundering rules, particularly in the context of ensuring consumer protection against crypto-based scams (see our previous Engage article explaining the exemption here). As such, there may be the potential tightening of regulation with a renewed focus on investor protection, particularly for retail consumers participating in crypto-asset markets.
Separately, the Labour Party has more recently indicated that as part of its vision for the future of the financial services sector, the government intends for the UK to become a global leader and standard-setter in innovation and fintech, including amongst other things by supporting the development of a UK central bank digital currency, and by making the UK “a global hub for securities tokenisation”—this involves clarifying the law around tokenisation, progressing ongoing work on the financial market infrastructure regulatory sandboxes “to work out the regulatory bottlenecks for tokenisation”, and exploring the possibility of a pilot issuance of tokenised gilts. The favourable stance on securities tokenisation and a potential digital pound suggests that there will be continued support for the use of distributed ledger technology in financial services.
The details of the new government’s plan for regulating the digital assets space remain to be seen. Although the government will not be bound by the approach proposed by the previous government prior to the election, it is unlikely that the government will return to square one. It is worth noting that both Tulip Siddiq and Rachel Reeves (Chancellor of the Exchequer) were involved in the relevant discussions during the development of the regulatory proposals whilst acting in their respective roles in the opposition. Additionally, it would be remiss of the new government to disregard the resources spent and the progress made to date by HMT, the FCA and the BoE.
A key issue in the immediate term is the introduction of new legislation with respect to stablecoins and crypto-asset staking—while new statutory instruments were previously expected to be laid before Parliament by July 2024, the timelines of the new government are currently unconfirmed.
Next steps
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Authored by Michael Thomas, Lavan Thasarathakumar, and Christina Wu.
