UK Treasury Committee Suggests Treating Crypto Investment as Gambling

The House of Commons Treasury Committee in the UK has proposed treating retail investment in cryptocurrencies as a form of gambling. In its report examining the advantages of cryptoassets, their underlying technological value, and the risks associated with investing in them, the committee expresses its disapproval of the government’s intention to regulate cryptocurrencies as financial services.

The report cautions against treating crypto investments as financial services, as it could create a misleading sense of security due to their high price volatility. It suggests that regulating cryptocurrency investment as a form of gambling is more appropriate, given the risk of consumers losing their entire investment.

The report acknowledges the wide range of digital instruments known as “crypto-assets,” which include rapidly evolving technologies. However, it highlights that dominant cryptocurrencies like Bitcoin and Ether lack intrinsic value.

Concerns are raised regarding crypto sponsorship in football, as it may give a false impression of safety. The report cites the CEO of the Financial Conduct Authority (FCA), Nikhil Rathi, who acknowledges that some individuals have suffered significant financial losses through crypto investments, while financial agencies have limited protective measures for vulnerable consumers against risks and scams.

Nevertheless, the report acknowledges the potential of cryptocurrencies to contribute to innovative financial technologies, such as reducing transaction fees and facilitating faster payments.

As a conclusion, the report strongly recommends that retail trading and investment in unbacked crypto-assets be regulated as gambling, aligning with the principle of “same risk, same regulatory outcome.”

CryptoUK, however, recommends that the government recognize crypto-assets as a new investment class rather than classifying them as financial investments or gambling.

In response to the report, Su Carpenter, the director of operations at CryptoUK, emphasizes the importance of establishing a regulatory framework for crypto-assets to maintain the UK’s competitiveness in the growing crypto market. They support a consistent regulatory approach and the adoption of international standards, considering the global nature of the crypto industry. They also suggest addressing various factors, including applying appropriate rules to trading venues, combating de-banking concerns, and developing progressive tax policies that account for the unique characteristics of crypto-assets.

“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.”