UK: treasury committee recommends treating crypto investment as gambling
The House of Commons Treasury Committee says crypto should not be classed as a financial service due to the high volatility of some crypto assets.
UK.- The UK’s House of Commons Treasury Committee has recommended that retail investment in cryptocurrencies be treated as gambling. In its report on the “benefits of cryptoassets and their underlying technology value, and the risk of investment in cryptoassets”, it criticises government plans to regulate cryptocurrencies as financial services.
The report warns that such a move could create a false impression of security for investments that can have very high price volatility. It concludes that due to the risk of consumers losing their entire investment, cryptocurrency investment should be regulated as a form of gambling.
It recognises that “so-called ‘crypto-assets’ span a wide and rapidly evolving range of digital instruments, although the market continues to be dominated by unbacked “cryptocurrencies” such as Bitcoin and Ether that we do not consider to have any intrinsic value”.
The report raised concerns about crypto sponsorship in football, arguing that it could create a misleading impression of safety. It also cites FCA CEO Nikhil Rathi who noted that some people had lost “life changing sums of money” through crypto investment and that financial agencies had “limited controls in place to protect vulnerable consumers from risks or scams”.
However, the report notes that cryptocurrencies can contribute to the creation of innovative technologies that benefit finance and the wider economy, by, for example, lowering transaction fees and speeding up payments.
The evaluation concluded: “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’.”
CryptoUK has recommended that the government recognise crypto-assets as a new investment class rather than as a form of financial investment or a form of gambling.
See also: Europe to regulate cryptocurrency trading
Responding to the report, CryptoUK director of operations Su Carpenter said: “We believe that a regulatory regime for crypto assets is key to enabling the UK to be competitive as a destination for the fast-growing crypto-asset market.
“We support the ‘same risk, same regulatory outcome’ approach and continued UK commitment to the development and promotion of international standards, given the cross-border nature of the crypto-asset industry.
“We suggest taking a broader view at all of the enablers for the UK to deliver on its ambition to become a global hub for the crypto industry, which includes a proportionate application of FinProm rules to trading venues, addressing concerns of de-banking by the crypto industry and progressive tax policy that addresses the nuances of the asset class.”