British Lawmakers Call for Treating Unbacked Cryptocurrencies as Gambling, Not Financial Services

A recent report from a panel of British lawmakers suggests that trading unbacked cryptocurrencies like Bitcoin (BTC) and Ether (ETH) should be regulated as gambling rather than a financial service. The United Kingdom is currently developing a regulatory framework for cryptocurrencies, combining existing financial asset laws with new crypto-specific regulations.

The report, issued by the U.K. Treasury Committee on May 17, strongly recommends treating retail crypto trading and investment as gambling to align with the principle of “same risk, same regulatory outcome.” The committee argues that the price volatility and lack of intrinsic value of unbacked crypto assets pose significant risks to consumers.

Chair of the Treasury Committee, Harriett Baldwin, expressed concern that regulating these activities as financial services might create a false perception of safety and protection. In the U.K., all forms of gambling, including online and land-based, are regulated by the Gambling Commission under the Gambling Act 2005 to prevent problem gambling and ensure compliance with Anti-Money Laundering measures.

The committee cited Dr. Larisa Yarovaya, an associate professor from the University of Southampton, who advocated for the same stringent regulation of crypto exchanges, online trading platforms, and other crypto-asset businesses due to the addictive nature of crypto speculation.

However, the report also acknowledges the potential benefits of certain crypto assets and their underlying technology in financial services and markets, such as cost reduction in cross-border payments and improved financial inclusion. The committee supports the development of an effective regulatory framework in the U.K. to foster these advancements while mitigating associated risks.

The committee, composed of 11 members of Parliament from the Labor and Conservative parties, as well as the Scottish National Party, including Harriett Baldwin, initiated the inquiry into the crypto industry in July 2022 to examine the role of cryptoassets in the U.K. According to research by the HMRC, the U.K.’s tax authority, 10% of U.K. citizens currently hold or have held crypto, with more than 55% never having sold any. The United Kingdom ranked 17th in Chainalysis’ 2022 crypto adoption index.

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