The United Kingdom is in the process of developing a regulatory framework specifically for cryptocurrencies, which will mix existing financial asset legislation with new rules for crypto-specific activities. However, a recent report from a group of British lawmakers has recommended that retail trading of unbacked crypto assets such as Bitcoin and Ether should be regulated as gambling rather than a financial service. The lawmakers argued that due to the price volatility and lack of intrinsic value, unbacked crypto assets pose significant risks to consumers.
The U.K. Treasury Committee has strongly urged retail crypto trading and investment activity to be categorized as gambling in line with the principle of “same risk, same regulatory outcome.” Regulating crypto in this manner would give it the same controls as land-based casinos, lotteries, betting shops, online betting companies, and others under the oversight of the Gambling Commission.
According to Treasury Committee chair Harriett Baldwin, Bitcoin and Ether account for two-thirds of the total market capitalization of crypto assets, both of which she describes as “unbacked.” Baldwin expressed concerns that treating retail trading and investment activity in unbacked crypto assets as a financial service would create a “halo effect” and lead consumers to perceive it as safer than it actually is.
In their argument, the lawmakers cited the opinions of Dr. Larisa Yarovaya, an associate professor from the University of Southampton. Yarovaya’s statements suggest that crypto exchanges, online trading platforms, and other crypto businesses should be regulated with similar stringency to gambling activities, as crypto speculation can be addictive.
While the committee took a cautious stance towards the risks associated with unbacked crypto assets, they did acknowledge the potential benefits that some cryptocurrencies and their underlying technologies may bring to financial services and markets. These benefits include reducing the costs of cross-border payments and improving financial inclusion. Therefore, the development of an effective regulatory framework that supports these positive developments while mitigating crypto-related risks is necessary. The committee welcomed government proposals to regulate crypto asset usage in financial services.
The U.K. Treasury Committee, which includes 11 members of parliament from various political parties, has been conducting research into the role of crypto assets in the country since July 2022. A recent study by His Majesty’s Revenue and Customs (HMRC) has indicated that 10% of U.K. citizens hold or have held cryptocurrency, with 55% of them never selling any. In the 2022 crypto adoption index, the United Kingdom ranks 17th globally.
Source: Cointelegraph
