UK Treasury Committee recommends crypto should be regulated as gambling
The UK's Treasury Committee has recommended that cryptocurrencies such as bitcoin (BTC-USD) and ether (ETH-USD) should be regulated as gambling.
In Wednesday's report, the government committee suggested that consumer trading in "unbacked crypto-assets" should be regulated as gambling due to their lack of intrinsic value, high volatility, and risk of losses.
The report said that these cryptocurrencies, which account for two-thirds of all crypto-assets, offer no discernible social good and are often associated with scams, fraud, and money laundering.
“We strongly recommend that the government regulates retail trading and investment activity in unbacked crypto-assets as gambling rather than as a financial service, consistent with its stated principle of ‘same risk, same regulatory outcome’,” the report said.
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Harriett Baldwin MP, chair of the Treasury Committee, said: “The events of 2022 have highlighted the risks posed to consumers by the crypto-asset industry, large parts of which remain a wild west. Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry.
“However, with no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like bitcoin more closely resembles gambling than a financial service, and should be regulated as such. By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost."
The report also expressed concern that the government's proposed regulation of consumer crypto trading as a financial service might give it an unwarranted "halo" effect, which could lead consumers to believe that the sector is safe and protected.
However, the committee acknowledged the potential benefits of crypto-asset technologies for cross-border transactions and payments in less developed countries. The report called for the government and regulators to keep up with these developments and avoid stifling potential beneficial innovations.
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The report also suggested a cautious approach towards public spending on crypto projects, urging the government not to invest in projects without clear beneficial use, such as the now-abandoned Royal Mint NFT.
The Committee is separately considering the topic of central bank digital currencies.
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