UK lawmakers are in disagreement with the Treasury regarding the categorization of unbacked cryptocurrencies as gambling.
A group of lawmakers in the UK believes that investing in unbacked digital assets like bitcoin (BTC) and ether (ETH) is similar to gambling and should be subject to gambling regulations. However, the government remains committed to regulating these assets as financial services, despite the disagreement.
The Treasury Committee has expressed concerns about the government’s proposal, stating that it may create a misleading perception of safety and protection for consumers regarding crypto-related activities. The committee made this announcement while releasing its report on cryptocurrency, following an inquiry initiated in July to gather input from stakeholders and regulators.
The UK government has invited industry members to provide feedback on its proposed regulations for the domestic cryptocurrency industry. The government aims to regulate cryptocurrencies by expanding existing financial market rules and establishing an authorization system for digital asset service providers. Additionally, a new bill currently being reviewed in Parliament aims to oversee cryptocurrencies as regulated financial activities.
The Treasury Committee expressed its concerns about the plan, emphasizing that consumer trading of cryptocurrencies like bitcoin resembles gambling more than a financial service. Harriett Baldwin, a Member of Parliament and Chair of the Treasury Committee, stated that due to the lack of intrinsic value, high price volatility, and absence of clear societal benefits, cryptocurrencies should be regulated as gambling. She cautioned consumers that by investing in these unbacked “tokens,” they should be aware that they could potentially lose all of their money.
In 2021, the global cryptocurrency market had a value of approximately $3 trillion. However, a significant portion of this value was lost following a market crash triggered first by the collapse of stablecoin issuer Terra and later by the decline of the crypto exchange FTX.
Despite the concerns raised, the finance ministry of the country remains committed to its proposal of regulating cryptocurrencies as financial services.
In an email statement to CoinDesk, a spokesperson for the finance ministry emphasized that the risks associated with cryptocurrencies are similar to those found in traditional financial services. They highlighted that financial services regulation has a proven track record in managing these risks, making it more suitable than gambling regulation. The spokesperson also mentioned that while cryptocurrencies present opportunities, the government is adopting a flexible approach to effectively regulate the market, focusing on addressing the most immediate risks in a manner that encourages innovation.
Crypto advocates are also expressing their disagreement with the committee’s recommendation to classify certain cryptocurrencies as gambling.
Richard Cannon, a partner at Stokoe Partnership Solicitors based in the UK, stated that modern regulated economies need to address and embrace the evolution of finance. Dismissing crypto investments as gambling does not contribute to the development of a sophisticated regulatory framework, according to Cannon’s statement to CoinDesk.
In its statement, the committee urged the government to stay updated with advancements in potentially beneficial innovations that may arise from the underlying technologies of crypto assets.
This information is for general knowledge only and should not be considered as advice for investing or making financial decisions.