The UK Treasury firmly rejects parliamentary committee's call to regulate consumer trading of unbacked cryptocurrencies as gambling.
In May, an all-party parliamentary committee raised concerns about the government's plans to regulate consumer crypto trading as a financial service, arguing that this might create a false sense of safety for consumers when, in fact, it is not adequately protected.
The committee, chaired by Harriett Baldwin, highlighted the risks posed to consumers by the cryptoasset industry, referring to large segments of it as a "wild west" with no intrinsic value, high price volatility, and lacking discernible social benefits. They asserted that consumer trading of cryptocurrencies like bitcoin more closely resembles gambling rather than a financial service and should be treated as such. The committee warned that consumers should be fully aware of the potential to lose all their money when betting on these unbacked 'tokens'.
In response, the Treasury firmly disagreed with the committee's recommendations. They argued that regulating consumer crypto trading as gambling would risk misalignment with international standards and could lead to overlapping responsibilities between financial regulators and the Gambling Commission.
The Treasury emphasized that globally agreed-upon recommendations from organizations like the International Organization of Securities Commissions and the G20 Financial Stability Board support the principle of 'same activity, same risk, same regulatory outcome.' This means that any cryptoasset activity carrying similar functions and risks as those in the traditional financial system (e.g., operating a trading platform or providing custody services) should be subject to equivalent regulatory measures.
According to the Treasury, implementing a gambling regulatory framework would fail to address many critical risks discussed in a recent government consultation on cryptoasset regulation. These risks include market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.
Instead, the Treasury argues that a financial services regulatory framework is more appropriate for addressing the risks associated with unbacked cryptoassets while fostering a safe environment for innovation. They reassured that this framework would include robust measures to mitigate consumer risks, as mentioned in the committee's report, and address concerns about consumers being misinformed.