UK lawmakers believe that regulating crypto retail trading as gambling is necessary.

2023-05-17

Summary: - British lawmakers recommend that unbacked cryptoassets such as Bitcoin and Ether be regulated as gambling instead of a financial service due to their volatility and lack of intrinsic value - The UK is working on a regulatory framework for crypto that would combine existing financial laws with new crypto-specific regulations - The Treasury Committee strongly recommends regulating retail crypto trading and investment as gambling to protect consumers - Lawmakers expressed concerns that regulating crypto as a financial service would create a false sense of security for consumers - The Gambling Commission in the UK regulates all gambling, including online and land-based businesses - The committee recognizes the potential benefits of crypto assets and their underlying technology, but emphasizes the need for effective regulation to mitigate risks - The Committee launched an inquiry into the crypto industry in July 2022 to explore the role of cryptoassets in the UK - 10% of UK citizens hold or have held crypto, according to research by HMRC, and the UK ranks 17th in Chainalysis' 2022 crypto adoption index

Full article:

The volatility and purported lack of intrinsic value of most crypto assets make it particularly risky for consumers, the politicians claimed.

The trading of so-called “unbacked cryptoassets” such as Bitcoin (BTC) and Ether (ETH) should be regulated as gambling rather than a financial service, a panel of British lawmakers said in a new report. 

The United Kingdom is currently working on a crypto regulatory framework that would mix existing financial asset laws with new crypto-specific rules.

However, in a May 17 House of Commons Committee report, the U.K. Treasury Committee “strongly recommended” regulating retail crypto trading and investment activity as gambling, consistent with the principle of “same risk, same regulatory outcome.”

It argued the price volatility and lack of intrinsic value mean unbacked crypto assets will “inevitably pose significant risks to consumers.”

Treasury Committee chair Harriett Baldwin described Bitcoin and Ether as accounting for two-thirds of the total market capitalization of crypto assets, both of which she claimed are “unbacked.”

“We are concerned that regulating retail trading and investment activity in unbacked cryptoassets as a financial service will create a ‘halo’ effect that leads consumers to believe that this activity is safer than it is, or protected when it is not.”

In the U.K., all gambling — whether online or land-based — is regulated by the Gambling Commission under the Gambling Act 2005. Its oversight includes businesses such as bingo halls, lotteries, betting shops, online betting companies and casinos, among others.

Graph used by the Committee as evidence of crypto’s volatility. Source: Yahoo Finance, U.K. Parliament

In its arguments, the lawmakers referred to written statements from Dr. Larisa Yarovaya, an associate professor from the University of Southhampton, who said crypto exchanges, online trading platforms and other crypto-asset businesses should be regulated with the same stringency as crypto speculation “can be addictive.”

In a small win for crypto, the committee said it also recognized the potential for some crypto assets and their underlying technology to bring benefits to financial services and markets — such as reducing the cost of cross-border payments and improving financial inclusion.

It said there should be an effective regulatory framework to support these developments in the U.K. while mitigating some of the risks associated with crypto assets.

Excerpt from the Fifteenth Report of Session 2022–23. Source: U.K. Parliament

“We therefore welcome the Government publishing proposals for how it plans to regulate cryptoassets used in financial services,” the Committee wrote.

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Including chair Harriet Baldwin, who once served as the Economic Secretary to the Treasury, the Committee consists of a total of 11 members of parliament from the Labor and Conservative parties as well as the Scottish National Party.

The committee said it had launched its inquiry into the crypto industry in July 2022 to explore the role of cryptoassets in the U.K.

Research conducted by His Majesty’s Revenue and Customs (HMRC) — the nation's tax authority — last year revealed 10% of U.K. citizens hold or have held crypto with more than 55% having never sold any.

Chainalysis ranked the United Kingdom 17th in its 2022 crypto adoption index.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom



Source: cointelegraph.com

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