UK lawmakers call for cryptocurrency to be regulated like gambling

On Wednesday, a UK treasury committee called for the regulation of cryptocurrencies in line with gambling due to the high risks associated with them.

In a report, the committee stated that rather than being referred to as a financial service, Bitcoin, Doge, Ether, and other cryptocurrencies should be treated as a form of gambling. They pointed out that, similar to gambling, cryptocurrency could lead to addictive tendencies in its users.

The committee also claimed that cryptocurrencies like Bitcoin and Ether made up around two-thirds of all crypto assets. The coins were not backed by any asset or currency, resulting in significant volatility in value and a possibility for the money invested to be lost.

The MPs further asked that the government stop using taxpayer funds on the promotion of tech innovations like digital tokens with no demonstration of its obvious benefits.

“Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry,” said Harriett Baldwin MP, the treasury committee chair.

“However, with no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like bitcoin more closely resembles gambling than a financial service, and should be regulated as such. By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”

The panel added that although blockchain technology was of benefit to the broader financial services industry, customers could lose significant amounts of money while betting on the ever-changing price of Bitcoin and other unbacked assets.

The British media previously reported that cryptocurrency trading would be placed under the Financial Conduct Authority. The body is in charge of ensuring compliance with money laundering regulations by companies.

According to the committee, making crypto seem like trading or investing would create a “halo” effect around the activity. This will ultimately encourage investors to wrongly assume that the activity is safer or more protected than it actually is.

The Financial Conduct Authority has informed investors of the potential losses associated with crypto trading on different occasions.

The report continued, “We therefore strongly recommend that the Government regulates retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service, consistent with its stated principle of ‘same risk, same regulatory outcome’.”

The committee’s recommendations could affect the upcoming regulations on cryptocurrency. The UK government considered a regulation following a consultation at the start of the year.

Industry body CryptoUK spoke in opposition to the committee, expressing its disagreement with labeling cryptocurrency as a form of gambling.

“We are both concerned and disappointed by these claims which are unhelpful, false, fundamentally flawed and unsubstantiated. The statement fails to reflect the true nature, purpose and potential of the crypto industry,” CryptoUK stated.

Cryptoassets possess a global total market capitalization of approximately $1.2 trillion. The figure is a small part of the financial system; however, the FTX exchange’s crash last year led to an even greater urgency for regulation of crypto.

The MPs also mentioned the UK government’s recent move to produce a non-fungible token (NFT) using the Royal Mint. The project, which was tagged as a “crypto gimmick” by Labour, was canceled in March this year, less than 12 months after its launch.

The committee cited the failed NFT project and asked the government to make more balanced moves toward technology. The government was also told to “avoid expending public resources on supporting cryptoasset activities without a clear, beneficial use case” and cease promoting specific technological innovations for their sake.

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