High-risk, low reward: Our evidence to the Treasury Select Committee on Crypto

In November, Positive Money was delighted to be invited to give evidence to the House of Commons Treasury Select Committee on the potential risks and rewards of growth of the cryptoasset industry. The Committee is a highly influential group of cross-party MPs charged with holding the Government, Bank of England and Financial Regulators to account on economic policy and financial regulation.

Before our session, the Committee heard from representatives of the Crypto industry who argued that crypto is the growth opportunity the government is desperately looking, is an important route for privacy in payments, and played down the risks it poses to ordinary people and the wider economy. 

To see our contributions to the session, you can watch the video on YouTube, or see the full session recording on Parliament TV.

In our evidence to the Committee, Positive Money’s Head of Policy and Advocacy Simon Youel made 3 key points

1.  Crypto won’t benefit the economy

The Committee wanted to know what the benefits would be for ordinary people from growing the crypto industry. The real answer is: very little. Some people might win from speculating on crypto, but many people will lose - and the losers tend to be ordinary people, rather than bigger investors. More widely, everyone will lose out if society’s resources and skilled labour are increasingly directed to the crypto industry, and if crypto leads to financial risks. We already have a wealth of evidence that an oversized financial sector harms the economy - so why would we want to grow the speculative parts of it that offer the least value to society? 

If the Government wants to increase investment, it could instead look to alternative vehicles for people to put their money instead of speculating on crypto - like a savings account used to fund investments in the infrastructure, green technologies and public services that we desperately need.

2. Crypto doesn’t deliver the innovation it promises

It’s often claimed by the industry that Crypto will ‘disrupt’ our money and payments system, and offer much-needed privacy in payments. But as we told the committee, the promise of innovation is over-hyped. Technologies such as distributed computing having been around for a long time, but have failed to gain adoption because they have generally proved less efficient than centralised ledgers for most purposes  And rather than operating as a decentralised means of payment - the principle that inspired the movements that led to cryptos takeoff - most crypto-assets are instead primarily a vehicle for speculation. True privacy in payments will be delivered by protecting access to and use of physical cash, and by introducing publicly issued, risk-free digital money, which could truly revolutionise our money and payments system.

3. Crypto is often used to avoid regulation - but it’s growth is an opportunity to rethink how we address illicit finance

Circumventing regulation is a key use for crypto-assets, and there is growing concern of crypto being used to facilitate flows of illicit finance. This week, the Government have laid new legislation before Parliament to bring cryptoasset firms under the remit of financial regulators. This is an important step towards reducing the harms caused by the crypto industry, but the devil will ultimately be in the detail, and whether the new rules prioritise properly regulating the industry above promoting it’s growth.

New regulations, as well as the forthcoming Illicit Finance Summit that the UK is set to host in June 2025, are an important opportunity to make sure crypto is properly regulated and demonstrate the need for public forms of digital money that offer the innovation and privacy that crypto purports but fails to deliver. Doing so will mean countering powerful lobbying from the crypto and wider financial industry, to ensure that the UK does not follow in the footsteps of the Trump administration. 

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