What Will The Cabinet Reshuffle Mean For UK Regulation In 2024?

November 27, 2023
Following a reshuffle, key ministerial staff at HM Treasury are now new to their roles, raising questions as to whether plans laid out in 2023 will sail seamlessly into 2024.

Following a reshuffle, key ministerial staff at HM Treasury are now new to their roles, raising questions as to whether plans laid out in 2023 will sail seamlessly into 2024.

Earlier this month, UK Prime Minister Rishi Sunak published a list of new appointments to the Cabinet.

There were major changes at the Treasury, including the exits of Andrew Griffith, formerly economic secretary to the Treasury and city minister, and John Glen, formerly chief secretary to the Treasury.

Griffith was moved to minister of state at the Department for Science, Technology and Innovation, while Glen was moved to minister of the Cabinet Office and paymaster general.

Bim Afolami replaced Griffith as economic secretary to the Treasury and city minister, while Laura Trott replaced Glen as chief secretary to the Treasury.

Afolami brings to the Treasury his experience at both the All-Party Parliamentary Group on Credit Unions and the Financial Inclusion Commission.

He still serves as chair of the All-Party Group, but he has since left his post as commissioner at the Financial Inclusion Commission.

Prior to becoming an MP, Afolami worked as a corporate lawyer at Freshfields Bruckhaus Deringer and Simpson Thacher & Bartlett, and as a senior executive at HSBC.

Trott already held a ministerial post prior to the reshuffle, having served as parliamentary under-secretary of state for pensions since October 2022.

Afolami’s to-do list

The two of the key regulatory initiatives that Griffith will hand to Afolami are the Treasury’s work on crypto-assets and stablecoins.

At the end of last month, as covered by Vixio, Griffith presented the Treasury’s “final proposals” on crypto-asset regulation in a consultation response and call for evidence.

“The government’s ambition to make the UK a global hub for crypto-asset technologies remains steadfast,” Griffith said in a statement accompanying the proposals.

“To realise this ambition, we must make the UK a place where crypto-asset firms have the clarity needed to invest and innovate, and where customers have the protections necessary for confidently using these technologies.”

Subject to parliamentary time, Griffith said the government aims to lay out secondary legislation on crypto-asset regulation in 2024.

For the first time, the proposals would see crypto-asset activities regulated as “financial services” and crypto-assets would be designated as “investments”.

However, before the crypto-asset regulation is introduced to parliament, a regulation on fiat-backed stablecoins will first be introduced, likewise as secondary legislation.

The Treasury refers to the stablecoin regulation as “phase 1” and the crypto-asset regulation that will follow as “phase 2”.

Phase 1 will focus exclusively on payment use cases of fiat-backed stablecoins, while phase 2 will tackle the regulation of fiat-backed stablecoin activities within the crypto ecosystem.

Griffith’s exit a loss to crypto industry

A strong force behind both of these initiatives, Griffith’s exit will be seen as a loss to the crypto industry, which had courted him closely during 2023.

In April this year, Griffith personally met with Coinbase CEO Brian Armstrong during a trip to London, during which he also met with former chancellor George Osborne.

Following his meeting with Griffith, Armstrong said the UK is “moving fast on sensible crypto regulation to both drive economic growth and consumer protection. We are excited to keep investing in the UK.”

Earlier this month, Griffith also met with Ben Horowitz and Chris Dixon, co-founder and general partner respectively of venture capital firm Andreessen Horowitz.

Known by its abbreviation a16z, Andreessen Horowitz is the one of the world’s largest investors in the crypto industry; in May last year, it announced a new $4.5bn crypto investment fund.

“Web3 and crypto have the potential to transform society, and I want the UK's world-leading tech sector to be on the forefront of it,” said Griffith, following the meeting. He also welcomed a16z’s opening of a new London office.

Does Afolami share the enthusiasm?

When asked about crypto-assets by Vixio, Afolami's office said that Britain has a long history of encouraging enterprise and remains committed to growth and innovation. It also said crypto is here to stay and should therefore be regulated.

However, other sources that spoke with Vixio were divided as to whether Afolami shares Griffith’s enthusiasm for crypto-assets and stablecoins.

One high-level source, who asked to remain anonymous, said that Afolami is “at least as sceptical about regulation to protect consumers, perhaps even more so.”

As evidence, the source pointed to Afolami’s founding of the Conservative Regulatory Reform Group in January this year, noting that the group seems preoccupied with business interests rather than the interests of consumers.

“This new group will seek to provide practical solutions to help create a regulatory framework [that] is pro-innovation, pro-investment and will help the UK to become a globally more competitive economy,” Afolami said in its founding statement.

“Afolami appears to be crypto-friendly and is likely to push ahead with the policy on crypto,” the source added.

However, others see reason to believe that Afolami may be less pro-crypto than Griffith.

Ron Delnevo, chair of the UK Payment Choice Alliance, pointed to Afolami’s work on credit unions and financial inclusion as evidence that he may be more “grounded” than Griffith.

“Griffith was the main champion of crypto at the Treasury,” said Delnevo. “In contrast, Afolami is unlikely to want to become captain of the 'Starship Crypto'.”

Delnevo added that, with the exit of Griffith from the Treasury, “political pressure” on the Financial Conduct Authority (FCA) to invest more in crypto regulation is “likely to ease”.

At CryptoUK, the UK’s main trade association for the crypto industry, a spokesperson told Vixio that the group is optimistic that Afolami will continue where Griffith left off.

“We look forward to working with Bim Afolami as the new economic secretary and as the UK government continues to deliver on its ambitions of cementing the UK as a global hub for crypto-assets and blockchain,” it said.

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