Betting on crypto may soon be regulated as traditional gambling in the UK, as the United Kingdom’s House of Commons Treasury Committee recommends the government to oversee crypto trading under such provisions. If accepted, the Gambling Commission would be responsible for monitoring crypto activities in the country, utilizing the Gambling Act 2005 as its guide while providing advice and assistance to individuals and businesses on how to avoid “problem gambling” with cryptocurrencies. Safeguards like anti-money laundering (AML) and counter-terrorist financing (CTF) would also apply to the industry.
Crypto trades would be taxed as gambling, potentially “with levies to support the debt advice and addiction services for which it will fuel demand.” The committee acknowledges that the “most convincing use case” for cryptocurrencies is to “improve the efficiency and reduce the cost of making [international] payments.” However, they express concerns over the “unbacked cryptoassets” with “no intrinsic value” such as Bitcoin and Ethereum. The committee also points out cryptocurrency’s inherent price volatility as a reason for them to resemble more of a gambling activity than a financial service.
The proposed regulation as gambling follows the principle of “same risk, same regulatory outcome.” The committee believes that treating retail trading and investment activity as a financial service, per the current approach, could potentially create a “halo” effect, leading consumers to perceive this activity as safer or more protected than it actually is.
Initial industry reactions to the report have been negative. Ivan Ivanchenko, Co-founder and COO of crypto trading platform Phinom Digital, argues that treating cryptocurrency trading as gambling would be detrimental to the UK’s digital currency aspirations. Ian Taylor, board advisor of UK’s crypto trade association CryptoUK, also expresses disappointment and concern over the proposal, stating that it fails to reflect the true nature, purpose, and potential of the crypto industry.
The controversial report comes as the British government previously signaled its intent to welcome crypto, with plans to make the UK a “global crypto asset technology hub.” Then Chancellor of the Exchequer, Rishi Sunak, expressed his ambition to make the UK a leading player in the crypto space and proposed regulating stablecoins as “a recognized form of payment” under the existing regulatory framework.
The government also announced a plan to align crypto firms with the existing Financial Services and Markets Act 2000, which governs traditional trading venues. Moreover, the British government was working with the Royal Mint to produce a non-fungible token (NFT) to be issued by summer. However, this venture has now been canceled, according to the committee’s report, with the British Finance Minister Jeremy Hunt stating that they are no longer convinced of the demand for such a project.
In conclusion, the proposal to regulate crypto trading as gambling has sparked a conflict between the UK’s crypto industry and the Treasury Committee. While the latter believes it could help protect consumers and ensure equal regulatory outcomes, the industry strongly disagrees, viewing the proposal as a step backward for the country’s digital currency aspirations.
Source: Decrypt
