The UK Treasury Committee suggests that cryptocurrency trading should be overseen under existing gambling laws, arguing that digital assets like Bitcoin and Ether have “no inherent value and do not contribute to societal benefit while consuming vast amounts of energy and being exploited by criminals for scams, fraud, and money laundering.”
The committee, a bipartisan group that has sway over policy, administration, and expenditure, submitted a comprehensive report to the House of Commons, stating that “cryptocurrencies expose consumers to significant risks due to their price instability and potential losses.
They further noted that “As retail trading in unbacked crypto resembles gambling more than a financial service, the MPs urge the Government to regulate it accordingly.”
Crypto regulation has become a contentious issue not only in the UK but also in the European Union and the US, with varying opinions on the matter.
US regulators have faced criticism for their enforcement-led regulation approach, while EU member states recently approved the comprehensive Markets in Crypto-Assets framework.
In the UK, policymakers are considering adapting existing securities regulations, and a consultation process is ongoing.
In the statement from the Treasury Committee, MPs warned of a misleading “halo effect” if the government decides to regulate crypto trading as a financial service, as it could falsely reassure consumers that such activity is safe and protected, which it is not.
Harriett Baldwin, chair of the Treasury Committee, highlighted the risks the cryptoasset industry posed to consumers, referring to unregulated sectors as a “wild west.” She stated that “Effective regulation is necessary to safeguard consumers and encourage beneficial innovation in the UK’s financial services sector.”
She added that “With no inherent value, extreme price fluctuations, and no apparent societal benefit, consumer trading of cryptocurrencies like Bitcoin is more akin to gambling than a financial service and should be regulated as such. When investing in these unbacked ‘tokens,’ consumers need to understand they could lose all their money.”
However, a Treasury spokesperson hinted that ministers might dismiss the committee’s recommendation, stating to Sky News that “The risks associated with crypto are typical of those in traditional financial services, and financial services regulation – not gambling regulation – has the proven capability to mitigate them.”
Laith Khalaf, AJ Bell’s head of investment analysis, also cautioned about the risks of classifying crypto as a gambling product, pointing out that it would exempt the industry from some of the “severe requirements of the financial services regime.”
Khalaf added that “While purchasing crypto is more similar to gambling than investing, the decision to regulate it as such must be meticulously considered to ensure it doesn’t end up being a lenient path.”
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