Jacob Rees-Mogg fires warning shot over national insurance hike to fund social care
Concern at the top of government over a rise to national insurance has spilled into the open after a senior minister suggested that voters would remember broken promises on tax.
Leader of the House of Commons Jacob Rees-Mogg used his weekly segment in the Sunday Express newspaper to republish a famous quote by former president George Bush senior: “Read my lips: no new taxes”.
Mr Rees-Mogg wrote that “voters remembered those words after president Bush had forgotten them”.
Many blamed the broken tax pledge by George Bush senior for his downfall. Pic: AP
The 1988 promise was broken by the former American leader and cited by many as a reason for his loss of the White House four years later.
While Mr Rees-Mogg did not reference national insurance directly, his intervention is representative of concerns among some cabinet ministers about the planned move.
Boris Johnson is expected to announce a long awaited plan to reform social care this week, together with an increase in national insurance to fund it.
The policy would go against a promise made by the Conservative Party in the last election not to increase income tax, VAT or national insurance.
Conservative donor and former deputy chairman of the party Lord Ashcroft tweeted the 2019 manifesto pledge with the comment “a reminder”.
Downing Street has not confirmed details of the announcement but a senior government source said ministers “will not duck the tough but necessary decisions needed to get the NHS back on its feet”.
Tackled on Sky News over a threatened rise in national insurance, government minister Nadhim Zahawi did not rule out raising tax in order to fund social care.
He told the Trevor Phillips On Sunday programme: “We are absolutely committed to the social care reform and we will be coming forward by the end of the year with those details.”
However, there is also concern about the prospect of taxing younger workers to subsidise the care and protect the homes of older people.
One minister told Sky News: “It doesn’t sit well with an across the board subsidy to help a few who have assets to protect.”
The social care plans are likely to include a cap on costs designed to stop assets like property needing to be used in full to fund care fees.
But this has provoked concern among some MPs because of the possibility of those with high value homes benefitting the most.
“I’m very concerned about the fact we seem to be protecting the inheritances of those with means at the same time as stripping the £20 uplift [in universal credit]”, said one newly elected MP.
A senior Conservative said “it seems like a tax on middle England … it does not seem very Conservative”.
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Social care: What govt hopes to do this week
Former prime minister John Major told the FT Weekend Festival that the policy was regressive and should be done in a “straight forward and honest fashion” through taxation.
Trade union boss Frances O’Grady also criticised the proposal saying it “wasn’t right” to hit young and low paid workers with a tax increase while “leaving the wealthy untouched”.
The TUC general secretary instead called for the government to increase capital gains tax – a levy on profits made when selling assets like property or shares.
Much of the criticism has stemmed from the fact that national insurance is not paid by people older than the state pension age.
The tax is also only paid on earnings, so wealthier individuals who live off rental income, savings or dividends do not contribute.
TUC chief Frances O’Grady says the move will hit young and low paid workers
Labour frontbencher Lisa Nandy told Sky News her party supported the “broad principle” of increasing taxes for the wealthy to pay for NHS and social care recovery.
Speaking Trevor Phillips, she said: “I think the broad principle that Frances O’Grady is laying out – that those with the broadest shoulders should take some of the burden – is absolutely right.
“Fixing the social care crisis is going to cost a great deal of money and the prime minister’s plan as we understand it… is that he’s going to break his 2019 promise to not raise national insurance contributions and load the entirety of the cost of social care on to supermarket workers, delivery drivers who are already suffering with high childcare costs, high housing costs and who kept us going through the pandemic.
“I think that’s a really difficult ask of a group of people who haven’t done well under this Conservative government over the last 11 years.”
With national insurance also paid by employers, business groups have also criticised the plan.
Oregon Attorney General Dan Rayfield’s lawsuit against Coinbase argues that XRP and other digital assets are unregistered securities.
Rayield sued US-based, publicly traded crypto exchange Coinbase for allegedly violating Oregon’s securities law. In an April 18 announcement, the Oregon Department of Justice said the suit was part of an effort to fill what it described as a regulatory vacuum left by federal agencies under the Trump administration:
“States must fill enforcement vacuum being left by federal regulators who are abandoning these cases under Trump administration,“ the department said.
Coinbase chief legal officer Paul Grewal voiced his frustration over the lawsuit in an April 21 X post. Justin Slaughter, the vice president of regulatory affairs at crypto investment firm Paradigm, pointed out that the lawsuit claims a long list of digital assets, including XRP (XRP), are unregistered securities.
Yarden Noy, partner at crypto legal firm DLT Law, told Cointelegraph that if the court ruled these assets are securities, it “would mostly create more confusion in this regard.” It would not be a binding precedent in other cases, not even within Oregon, he added.
Still, Noy explained that the court decision could be used by regulators and potential plaintiffs to build and make their cases. He said:
“Just like the decision in the Ripple case […] which the complaint seems to be ignoring entirely, did not make all tokens immediately listable on US platforms, I don’t expect the opposite to happen here.”
Related: Court grants 60-day pause of SEC, Ripple appeals case
A long list of crypto assets
Paradigm’s vice president of regulatory affairs Justin Slaughter called the action a “kitchen sink lawsuit.” The list of tokens cited includes high-profile altcoins such as Aave (AAVE), Avalanche (AVAX), Uniswap (UNI) and Near Protocol (NEAR), as well as the wrapped version of Terra’s collapsed token, wLUNA — but not LUNA itself.
The complaint does not explain why certain wrapped assets were included while others were excluded. It states:
“Coinbase—through the Coinbase Platform and Prime—has made available for trading in Oregon crypto assets that are offered and sold as investment contracts, and thus as securities. This includes, but is not limited to, the units of each of the crypto securities further described below.“
Related: Circle, BitGo about to apply for bank charters, others may follow: WSJ
XRP in the legal crosshairs once again
Ripple Labs, the firm behind XRP, has already faced a years-long legal battle with the US Securities and Exchange Commission. Ripple was hit with a lawsuit by the SEC in late 2020, calling XRP a “$1.3 billion unregistered securities offering.”
The same lawsuit was dropped by the SEC in late March, but it provided little legal certainty for the crypto industry. Oregon’s complaint comes amid growing concern among state officials that federal regulators are pulling back from crypto enforcement. The suit appears to be part of a broader trend of state-level authorities stepping in.
Before Oregon’s action, XRP’s legal standing was being viewed as increasingly clear. Coinbase — a crypto exchange known for its relatively cautious stance on regulatory matters — added XRP futures to its derivatives trading platform on April 21.
Magazine: XRP win leaves Ripple and industry with no crypto legal precedent set
US-based publicly traded crypto exchange Coinbase confirmed that it is considering applying for a US federal bank charter.
In a statement sent to Cointelegraph, Coinbase said it is considering pursuing a US federal bank charter, according to a company spokesperson.
“This is something Coinbase is actively considering but has not made any formal decisions yet,” the spokesperson told Cointelegraph.
The comments follow recent reports suggesting that Coinbase and multiple other major crypto firms were planning to apply for US banking licenses. Coinbase, stablecoin issuers Circle and Paxos, and crypto custodian BitGo were the other firms mentioned.
Coinbase did not clarify to Cointelegraph why it is considering pursuing a bank charter. Still, a license could potentially allow crypto firms to operate like traditional lenders, taking deposits and making loans. Cointelegraph also reached out to the other firms reportedly considering applying for a charter.
Still, firms that obtain banking charters are subject to stricter reporting and regulatory oversight. One example is Anchorage Digital, a crypto firm holding a federal bank charter.
Despite the firm obtaining the license, recent reports indicate that the US Department of Homeland Security’s El Dorado Task Force has launched an investigation into Anchorage Digital Bank.
Related: Crypto companies seeking bank charters under Trump admin — Report
Many crypto firms are likely to apply
The reports also follow the US Office of the Comptroller of the Currency granting a preliminary conditional approval for a US bank charter to Paxos back in 2021. Firms may now be considering applying as US regulators take a softer stance on crypto regulation and integrating stablecoins in the broader financial system.
The change in stance is visible at multiple levels of the US federal government. Federal Reserve Chair Jerome Powell recently said that as digital assets gain mainstream adoption, establishing a legal framework for stablecoins is a “good idea.” He also recognized that the crypto space delivered a consumer use case that “could have wide appeal.”
Related: ECB flags risk of financial contagion from US crypto push
Evolving US stablecoin regulation
The US House Financial Services Committee passed a Republican-backed stablecoin framework bill earlier in April — the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act.
Another bill that is moving through the US legislative process is the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act. The STABLE and GENIUS bills differ in how they regulate the stablecoin industry in their current form.
The GENIUS Act was introduced first and passed the US Senate Banking Committee in mid-March. The STABLE Act, on the other hand, emphasizes federal oversight, while the GENIUS Act seeks a more flexible path that considers both state and federal regulations.
The STABLE Act would enforce a two-year moratorium on issuing collateralized stablecoins that are backed by self-issued digital assets. The bill would also require that stablecoin reserves be held separate from business funds.
The GENIUS Act would establish a legal framework for stablecoin payments and leverage US-based stablecoin issuers in an attempt to reinforce the dollar’s global dominance. The bill would also enhance Anti-Money Laundering (AML) safeguards, reserve and liquidity standards and sanctions checks. It classifies stablecoin issuers as financial institutions.
Magazine: Coinbase and Base: Is crypto just becoming traditional finance 2.0?
The European Central Bank (ECB) raised an alarm over potential fallout from aggressive US support for the crypto industry, warning that a surge in dollar-backed stablecoins could destabilize Europe’s financial system.
According to a policy paper seen by Politico, the ECB has asked for a revision of the Markets in Crypto-Assets Regulation (MiCA) regulatory framework for cryptocurrencies just months after it came into effect.
The concern is that US reforms backed by President Donald Trump could flood European markets with dollar-denominated stablecoins.
The ECB fears this could trigger a flight of European capital into US assets, undermining EU financial sovereignty and exposing banks to liquidity risks.
ECB and European Commission clash over MiCA rules
While the ECB calls for tighter controls, the European Commission dismissed the warnings as exaggerated, per the report.
The report, citing two diplomats and one EU official, said that the existing MiCA framework is robust enough to manage stablecoin risks despite potential US policies like the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS), two bills aimed at expanding America’s crypto footprint.
“The Commission was quite clear that they had different views on this topic,” and “not very many (countries) supported the idea that we should now jump the gun and start making quick changes in (the rules) based on this alone,” one of the diplomats reportedly told Politico.
The stablecoin sector now commands a valuation of $234 billion, according to data from CoinMarketCap.
The ECB warned that European issuers could face redemption pressures from EU and foreign holders without stricter limits, potentially sparking a financial “run” and harming exposed institutions.
“The worry is warranted,” Mikko Ohtamaa, co-founder and CEO at Trading Strategy, said in a post on X. “However, the EU had the first mover advantage with the regulation and they screwed it up.”
Ohtamaa said no EU stablecoin is globally competitive due to MiCA’s restrictive rules, which are influenced by bank and legacy finance lobbying.
Related: US regulator,s FDIC and CFTC, ease crypto restrictions for banks, derivatives
Tether remains a major critic of MiCA
Tether, the issuer of the world’s largest stablecoin, USDt (USDT), has long been a critic of the EU’s MiCA regulation.
Last year, Tether CEO Paolo Ardoino argued that MiCA’s requirements, particularly the mandate for stablecoin issuers to hold at least 60% of reserves in EU bank accounts, could introduce systemic risks to both stablecoins and the broader banking system.
Due to noncompliance with MiCA, USDT has faced delistings from major European exchanges, including Coinbase, Crypto.com and Kraken.
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