A cross-party Treasury committee has called for the UK Government to regulate cryptocurrency trading as a form of gambling rather than merely a financial service. According to the cross-party group of Members of Parliament, the Government must avoid wasting more taxpayer money on the promotion of various technological innovations, such as digital tokens, without informing the wider public about the clear benefits of such a move.
The committee also noted that cryptocurrency trading and investing can cause addictions, just like gambling. However, while the underlying blockchain technology could give an advantage to the wider financial services industry, betting on the highly-volatile price of some assets, such as Bitcoin and other cryptocurrencies, could result in massive losses.
As Harriett Baldwin – a member of the Conservative Party and a Treasury committee chair – explained, the implementation of working and efficient regulation is clearly needed to protect customers from gambling-related harm, not to mention it supports productive innovation in the financial service industry of the UK. Consumer trading on cryptocurrencies, however, very much resembles regular gambling rather than a financial service, considering its huge price volatility, and also the fact that it has no intrinsic value and has no visible social good.
In a report to the Financial Conduct Authority (FCA), the Treasury select committee shared that some proposals aimed at regulating the crypto industry could result in a “halo” effect that creates the impression that crypto trading is safer than other forms of gambling. According to the cross-party group of MPs, that is exactly what might tempt people to invest money into a speculative market that should otherwise be avoided.
High Volatility of Cryptocurrency and Lack of Clear Social Benefit Resemble Gambling
The aforementioned recommendations could affect the UK Government’s plans to regulate cryptocurrencies in the country, with some measures being considered after a consultation on the issue took place earlier in 2023.
So far, it has been widely expected that trading of crypto assets would be put in the scope of the Financial Conduct Authority (FCA) – a body that is currently responsible for making sure that companies are in line with money-laundering rules, and is set to adopt some task of monitoring adverts.
🚨 Published today 🚨
🪙 We’ve just published our report on cryptoassets, setting 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
However, the events of 2022 have only emphasised the risks faced by local consumers as a result of the expansion of the so-called crypto-asset industry. In a statement released earlier this week, Ms Baldwin shared that, so far, local crypto holders had lost hundreds of millions of pounds to fraud, cryptocurrency values’ swings, and scandals. As mentioned above, according to her, the lack of intrinsic value and the lack of discernible social good, combined with the huge price volatility of cryptocurrency, consumer trading of cryptocurrencies pretty much resembled gambling, which is why it should be regulated at such.
According to a person with knowledge of the matter, the committee is willing to avoid creating the perception that crypto is a legitimate investment, so its report to the Financial Conduct Authority was not targeting the details of protections under both regimes.
- Author
Daniel Williams
