When he was still in No 11 Downing Street, Philip Hammond was known for keeping grip on the public purse strings so assiduously 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 this week appointed as a senior advisor 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 per month.
“For Lord Hammond, this is a matter of making sure Britain doesn’t fall behind,” says Dimitry Tokarev, chief executive of Copper, “brushing off blockchain could be a mistake with a significant cost to the economy.”
Ex-Chancellor Philip Hammond
Credit: JULIAN SIMMONDS
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 and once a close colleague, said that regulation of the market 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.
Crypto’s boom in value
For true believers, Hammond’s appointment is a sign the crypto community has finally started to crack SW1. Josh Bell, general partner 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 again – above £40,000 – the crypto sector is facing a regulatory crackdown.
In the UK, this includes the Financial Conduct Authority’s Cryptoasset Register. Companies that have been vetted by the regulator 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 crypto currency 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 a role at cryptocurrency start-up OpenBrix in 2018 after the Financial Times revealed a pay deal that would have seen him earn crypto tokens for the role. However, he later said he believed he had correctly declared the role and that the idea he had concealed anything was “outrageous”.
Stephen Hammond, a Conservative MP on the Treasury Committee, abruptly resigned from crypto start-up IronX, days after having taken up a job there, 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 advisor, is a known blockchain advocate. Steve Baker, the MP for High Wycombe, had a Bitcoin wallet, buying an “experimental” amount, he says, but has since sold.
Former No. 10 advisor Dominic Cummings
Credit: Jeff Overs/BBC
The computer science graduate adds: “Personally I think crypto assets will be a speculative bubble, [although] blockchain technology could have wide use in the long term.”
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 Docherty-Hughes, 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”.
How to buy Bitcoin
Ministers are prohibited from lobbying for two years after leaving office. Hammond stepped down as a Minister in July 2019.
Furthermore, the spectre of the Greensill saga, which saw former Prime Minister David Cameron lobbying on behalf of an Australian financier for a bank that ultimately collapsed, is currently hanging uneasily over all advocacy work. Last month, Lord Hammond was cleared of breaching lobbying rules after he contacted a senior civil servant on behalf of another business he advises, OakNorth Bank.
Cryptocurrency enthusiasts argue boosting MPs’ understanding of digital currencies will help pave the way for a City of London leading 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 Telegraph that Hammond will receive a small equity stake in the company. Copper declined the comment.
Mr Tokarev, however, said: “He [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.”