In the Handbook of Eighteenth Century English Costume by C. Willet Cunnington and Phillis Cunnington, the authors write that covered buttons (i.e. coat buttons covered in the same material as the coat) were made illegal by acts of Anne and George I (pg. 47), though the legislation was usually ignored (pg. 189). Why was this the case?
Traditionally there are button makers and tailors. Tailors could easily make their own fabric covered buttons with the leftover fabric. Button makers saw it as a threat to their industry and button maker's guild lobbied to make fabric covered buttons illegal.
I surmised this would be a protectionist measure of some kind- and so it proves. A little googling turned up this report of a court case an 1843 where the George I act was quoted:
http://paperspast.natlib.govt.nz/cgi-bin/paperspast?a=d&d=NZGWS18430405.2.5.3
It refers to the Act as 7 Geo I cap 12 and quotes "That (....) it shall not be lawful for any person (....) to use or wear (....) any buttons or button-holes made or bound with cloth, serge, drugget, frieze, camblet or any stuffs whereof clothes or wearing garments are usually made " with a penalty of 40 shillings fine per dozen buttons or holes.
Notably unmentioned is the use of silk- and that is the industry the law was designed to protect. The title of the act (from http://www.nationalarchives.gov.uk/a2a/records.aspx?cat=061-hlpo_1-3&cid=1-1-1-3-12#1-1-1-3-12 ) is "An Act for imploying the Manufacturers, and encouraging the Consumption of Raw Silk and Mohair Yarn, by prohibiting the Wearing of Buttons and Button Holes made of Cloth, Serge or other Stuffs."
It was about that time wasn't it, that Indian cottons began to be imported and undercut the silk-weavers?