In an unorthodox move, a group of British legislators has proposed that the trading of "unbacked cryptoassets" such as Bitcoin and Ethereum should be regulated akin to gambling, not as a financial service, according to a recent House of Commons Committee report.
As the United Kingdom is currently crafting a regulatory framework for cryptocurrencies, blending existing financial asset laws with crypto-specific regulations, this recommendation is raising eyebrows. The Treasury Committee argues that given the significant price volatility and lack of inherent value in these unbacked cryptoassets, they inherently expose consumers to significant risk.
Harriett Baldwin, the Chair of the Treasury Committee, voiced concerns over the potential misleading implications of regulating the retail trade of unbacked cryptoassets as a financial service. She believes it could potentially create a misleading 'halo' effect, causing consumers to falsely perceive this activity as safer than it actually is or to believe it offers protections that are not in place.
The lawmakers' argument draws on the views of Dr. Larisa Yarovaya, an associate professor from the University of Southampton. She has suggested that crypto exchanges, online trading platforms, and other crypto-related businesses should be subjected to the same stringent regulations as gambling, as crypto speculation can be addictive.
The Gambling Commission in the U.K. regulates all forms of gambling under the Gambling Act 2005, with the goal of preventing problematic gambling and enforcing Anti-Money Laundering measures.
However, the committee did acknowledge the potential benefits of some cryptoassets and their underlying technology, such as reducing the cost of cross-border payments and enhancing financial inclusion. They expressed the need for a robust regulatory framework that would foster these advancements in the U.K. while mitigating some of the associated risks.
The committee, consisting of 11 members from various political parties, including the Labor and Conservative parties and the Scottish National Party, launched its inquiry into the crypto industry in July 2022. According to research by the nation's tax authority, His Majesty’s Revenue and Customs (HMRC), 10% of U.K. citizens hold or have held crypto, with over 55% never having sold any. The U.K. was ranked 17th in Chainalysis's 2022 crypto adoption index.
Harriett Baldwin, the Chair of the Treasury Committee, voiced concerns over the potential misleading implications of regulating the retail trade of unbacked cryptoassets as a financial service. She believes it could potentially create a misleading 'halo' effect, causing consumers to falsely perceive this activity as safer than it actually is or to believe it offers protections that are not in place.
The lawmakers' argument draws on the views of Dr. Larisa Yarovaya, an associate professor from the University of Southampton. She has suggested that crypto exchanges, online trading platforms, and other crypto-related businesses should be subjected to the same stringent regulations as gambling, as crypto speculation can be addictive.
The Gambling Commission in the U.K. regulates all forms of gambling under the Gambling Act 2005, with the goal of preventing problematic gambling and enforcing Anti-Money Laundering measures.
However, the committee did acknowledge the potential benefits of some cryptoassets and their underlying technology, such as reducing the cost of cross-border payments and enhancing financial inclusion. They expressed the need for a robust regulatory framework that would foster these advancements in the U.K. while mitigating some of the associated risks.
The committee, consisting of 11 members from various political parties, including the Labor and Conservative parties and the Scottish National Party, launched its inquiry into the crypto industry in July 2022. According to research by the nation's tax authority, His Majesty’s Revenue and Customs (HMRC), 10% of U.K. citizens hold or have held crypto, with over 55% never having sold any. The U.K. was ranked 17th in Chainalysis's 2022 crypto adoption index.
