The sale of so-called “unbacked cryptoassets” such as Bitcoin (BTC) and Ether (ETH) should be regulated as gambling rather than a financial service, a panel of British lawmakers said in a new report.
The United Kingdom is currently working on a crypto regulatory framework that will combine existing financial asset laws with new crypto-specific rules.
However, in a May 17 report to the House of Commons Committee, the UK Treasury Committee “strongly recommended” regulating retail crypto trading and investment activities such as gambling, in line with the principle of “like which is dangerous, the same result as regulation.”
We have recently published our report on cryptoassets, which sets 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 argues that price volatility and lack of intrinsic value means unbacked crypto assets “inevitably present significant risk to consumers.”
The chairman of the Treasury Committee, Harriett Baldwin, described Bitcoin and Ether as accounting for two-thirds of the total market capitalization of crypto assets, which he admitted were “not supported.”
“We are concerned that regulating retail trading and investment activity in unbacked cryptoassets 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 no.”
In the UK, all gambling — whether online or land-based — is regulated by the Gambling Commission under the Gambling Act 2005. Its regulation includes businesses such as bingo halls, lotteries, betting shops, online betting companies and casinos, and others.
In its arguments, the legislators referred to written statements from Dr. Larisa Yarovaya, an associate professor from the University of Southampton, who said that crypto exchanges, online trading platforms and other crypto-asset businesses should be regulated with the same strictness as crypto speculation “can be addictive.”
In a small win for crypto, the committee said it also recognized the potential for some crypto assets and their underlying technology to bring benefits to financial services and markets – such as reducing cost of cross-border payments and improve financial inclusion.
It said there must be an effective regulatory framework to support these developments in the UK while mitigating some of the risks associated with crypto assets.
“We therefore welcome the Government’s proposals to publish how it plans to regulate cryptoassets used in financial services,” the Committee wrote.
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Including chair Harriet Baldwin, who previously served as Economic Secretary of the Treasury, the Committee consists of a total of 11 members of parliament from the Labor and Conservative parties as well as the Scottish National Party.
The committee said it was launching its inquiry into the crypto industry in July 2022 to examine the role of cryptoassets in the UK.
Research carried out by His Majesty’s Revenue and Customs (HMRC) — the country’s tax authority — last year revealed that 10% of UK citizens own or hold crypto with more than 55% not selling at all what
Chainalysis ranks the United Kingdom 17th in the 2022 crypto adoption index.
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