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<p>No estimate has been made on the potential value of capital gains tax (CGT) that
are due on gains from cryptoassets held as investments or any tax liabilities arising
from decentralised finance (also known as DeFi). The self-assessment form does not
currently separate capital gains made on cryptoassets from other assets. As a result,
a reliable estimate for CGT due from cryptoassets would only be available at a disproportionate
cost.</p><p> </p><p>The recently released cryptoassets manual, one the most detailed
publications from any tax administration, explains the tax consequences of different
types of transactions involving cryptoassets for both business accepting them as well
as individuals using them. HMRC has taken action, including using powers provided
by Parliament to gather data, to identify and investigate those that have failed to
declare their tax liabilities.</p><p> </p><p>Regarding the possible merits of a sterling-based
stablecoin, I refer the Honourable Gentleman to the answer given to PQ UIN 37102.</p><p>
</p><p>On the issue of money supply, Bitcoin trading or decentralised finance will
need to become a significant source of lending to the real economy in the UK before
they have a notable impact on money supply measurements.</p><p> </p><p>Regarding the
Financial Conduct Authority (FCA) and the Prudential Regulation Authority’s (PRA)
role with respect to decentralised finance, I refer the Honourable Gentleman to the
answer given to PQ UIN 37103.</p><p> </p><p>With regards to the FCA’s cryptoasset derivatives
ban for retail consumers, the FCA stated that it found these products to be ill-suited
for retail consumers due to potential harms, including the high risk of suffering
losses. The FCA has noted that it will keep this prohibition under review. The FCA
is an independent body and its decision to take the ban forward after consultation
is based on powers granted to the FCA under statute, pursuant to the FCA’s objectives
which include protecting consumers, enhancing market integrity and promoting competition.</p><p>
</p><p>Regarding the possible merits of the FCA restricting UK banks’ access to decentralised
finance, the FCA is an independent regulator, and considers the risks of banks engaging
in decentralised finance as one of the many risks it considers. Most decentralised
finance activities are not regulated in the UK. Accordingly, the Government does not
have accurate information on the number of entities operating in the UK in comparison
to the EU and the US.</p><p> </p><p>On the issue of clearing, the EU has granted a
temporary equivalence decision to UK Central Counterparties (CCPs) which lasts until
June 2022.</p><p>Therefore, without any further action by EU authorities, certain
UK CCPs may need to begin offboarding EU clearing members by the end of March 2022
in order to be ready for equivalence expiring in June 2022.</p><p>However, letting
equivalence expire in June next year would raise the cost of clearing for firms, particularly
EU ones, and present significant financial stability risks. The Government therefore
hopes that equivalence would not be allowed to expire in June 2022. As it stands,
the Government has seen limited evidence of activity moving.</p>
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