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Trading in so-called “unsecured crypto assets” like bitcoin (BTC) and ether (ETH) should be regulated as gambling, not a financial service, according to a new report from a group of UK lawmakers.
The United Kingdom is currently working on a regulatory framework for cryptocurrencies that will merge existing financial asset laws with new regulations relating to cryptocurrencies.
However, in a May 17 House of Commons committee report, the UK Treasury Committee “strongly recommended” that retail trading of cryptocurrencies and investment activities be regulated as gambling in accordance with the principle of “same risk, same result of regulation”.
Published today
We’ve just published our report on cryptoassets, setting out our recommendations for the Government’s approach to regulating this market.
Learn more and read the report in full https://t.co/CK7CVH2pQ1 pic.twitter.com/GvDQfiGhPU
— Treasury Committee (@CommonsTreasury) May 16, 2023
It argued that price volatility and lack of intrinsic value meant that unsecured crypto assets “will inevitably pose significant risks to consumers.”
Treasury Committee Chair Harriett Baldwin described that bitcoin and ether account for two-thirds of the total market capitalization of crypto assets, which she says are “unbacked.”
“We are concerned that the regulation of retailing and investing activities in relation to unsecured crypto assets as a financial service will create a “halo” effect that will lead consumers to believe that this activity is safer than it is, or protected when it is not.”
In the UK, all gambling – online or land-based – is regulated by the Gambling Commission under the Gambling Act 2005. Its oversight includes businesses such as bingo parlors, lotteries, betting shops, online betting companies, and casinos, among others.
In their arguments, the legislators referred to written statements by Dr Larisa Yarovaya, an associate professor at the University of Southampton, who said that cryptocurrency exchanges, online trading platforms and other activities related to crypto assets should be regulated with the same strictness as cryptocurrency speculation. can be addictive.”
In a small win for crypto, the committee said it also recognized the potential of some crypto assets and the technology behind them to benefit financial services and markets, such as lowering the cost of cross-border payments and improving financial inclusion.
It states that there must be an effective regulatory framework to support these developments in the UK, while mitigating some of the risks associated with crypto assets.
“Therefore, we welcome the government’s publication of proposals on how it plans to regulate crypto assets used in financial services,” the Committee wrote.
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Including Chair Harriet Baldwin, who once served as Chancellor of the Exchequer for Economic Affairs, the committee is made up of a total of 11 Labor and Conservative MPs, as well as the Scottish National Party.
The committee said it launched an investigation into the cryptocurrency industry in July 2022 to look into the role of crypto assets in the UK.
A study by His Majesty’s Revenue Service (HMRC) last year found that 10% of UK citizens own or have held crypto, with over 55% never selling it.
Chainalysis has ranked the UK 17th in its 2022 Cryptocurrency Adoption Index.