The Sunday Telegraph - Business & Money
MPS buy into crypto just as regulators start crackdown
Lord Hammond is the latest politician to work with digital coin firms, says
When he was still in No 11 Downing Street, Philip Hammond was known for keeping grip on the public purse strings so assiduous that he attracted the nickname “spreadsheet Phil”.
Now the former chancellor is looking after a very different kind of wallet. Lord Hammond of Runnymede was last week appointed as a senior adviser to Copper, a UK cryptocurrency start-up.
The fast-growing company, which raised $75m (£55m) this summer, acts as a gateway between mainstream finance and unregulated digital coin markets, handling $50bn in transitions a month.
“For Lord Hammond, this is a matter of making sure Britain doesn’t fall behind,” says Dmitry Tokarev, chief executive of Copper, “brushing off blockchain could be a mistake with a significant cost to the economy.”
Hammond joins a growing number of parliamentarians who have taken an interest in cryptocurrency – despite increasing alarm from regulators, who fear the industry has encouraged high-risk trading and may even threaten the wider economy.
The former chancellor disclosed his new job just days before Sir Jon Cunliffe, deputy governor of the Bank of England, said regulation is needed “as a matter of urgency” and the risk of wild price swings in digital coins is a “financial stability concern”. The International Monetary Fund added that it fears there is a rising threat from cryptocurrency scams and bubbles.
Cryptocurrencies such as Bitcoin run on a “blockchain”, or digital ledger. They are designed to be independent of central banks, impossible to hack, and hardened against fraud. Hundreds of copycat coins have emerged. Of course, among those are thefts and failures that have lost investors hundreds of millions of pounds, while even the most popular coins are subject to huge price swings which can cost investors their life savings.
For true believers, Hammond’s appointment is a sign the crypto community is finally cracking SW1. Josh Bell, at Copper backer Dawn Capital, says the move is “further evidence of digital assets moving into the mainstream investment framework”.
Support from senior figures in the political world comes at an important time. Even though Bitcoin’s price is soaring above £40,000 again, the sector is facing a regulatory crackdown.
In the UK, this includes the Financial Conduct Authority’s Cryptoasset Register of companies that it has vetted as complying with standards on money laundering and terror financing. Just 14 firms have been approved. Copper is still on a waiting list. The Treasury, meanwhile, is planning to regulate “stablecoins” – coins linked to the dollar or sterling.
Ian Taylor, head of the trade body Cryptouk, says: “The cryptocurrency
‘Hammond’s move is further evidence of digital assets moving into the mainstream investment framework’
industry is now big and ugly enough that it needs to be looked at from the policy side.”
Hammond is far from the only parliamentarian with a crypto side gig. Grant Shapps quit start-up Openbrix in 2018 after the Financial Times revealed he would have earned crypto tokens. He later said he believed he had correctly declared the role and the idea he concealed anything was “outrageous”.
Stephen Hammond, a Conservative MP who was on the Treasury select committee, abruptly resigned from start-up Ironx days after joining after taking “further advice”.
Others in Westminster have a personal interest in digital coins. In January, Marcus Fysh, the MP for
Yeovil, disclosed holdings in Ethereum and Ada tokens in his register of interests. Dominic Cummings, the former No 10 adviser, is a known blockchain advocate. Steve Baker, the MP for Wycombe, had a Bitcoin wallet, buying an “experimental” amount, he says, but has since sold.
Elsewhere, Tom Tugendhat raised eyebrows during the Queen’s Speech with a tubthumping contribution about digital coins. Philip Davies, a Conservative MP for Shipley, is seen as another crypto industry ally.
Some cryptocurrency companies have given their backing to the All Party Parliamentary Group (APPG) on Blockchain. APPGS have no official status in parliament but some critics have questioned if they are transparent enough. The blockchain group, chaired by SNP MP Martin Dochertyhughes, is paid for by the Big Innovation Centre and its sponsors include crypto foundation Iota and blockchain company Stratis. The Big Innovation Centre has spent more than £280,000 on the group. It did respond to a request for comment.
Transparency campaigners have called for more oversight over APPGS and the jobs taken up by former ministers. Steve Goodrich, of Transparency International, says “much greater openness” is needed over how APPGS are funded and run. He adds oversight of the “revolving door” between Westminster and the private sector is “woefully inadequate”.
Ministers are prohibited from lobbying for two years after leaving office. Hammond stepped down as a minister in July 2019.
Crypto enthusiasts argue boosting MPS’ understanding of digital coins will help the City of London lead the world in blockchain technology.
Copper’s Tokarev says: “We are hoping that we can work together with regulators and get up to speed. Blockchain is not just another technology, but a catalyst for fundamentally changing what financial services infrastructure looks like.”
As part of his deal to join Copper, one source told The Sunday Telegraph Hammond will receive a small stake in the company. Copper declined to comment. Mr Tokarev, however, said: “[Hammond] is truly passionate about making sure this opportunity is not missed in this country. We are all of us a little bit beyond pure financial motivation here.”