Investing in unbacked digital assets like bitcoin (BTC) and ether (ETH) resembles gambling and should be regulated as such, a cross-party lawmaker group in the U.K. has said. But the government is sticking by its plans to regulate them as financial services.
The Treasury Committee is worried the government’s proposal “will create a ‘halo’ effect, leading consumers to believe this activity is safe and protected, when it is not,” it said in a Wednesday announcement marking the publication of its report on crypto. The committee kicked off an inquiry into the industry in July to gather views from stakeholders and regulators.
The U.K. government recently asked industry members to share feedback on its proposed rules for the local crypto industry. In its consultation, the government said it wanted to regulate crypto by extending existing financial markets rules to create an authorization regime for digital asset service providers. A new bill going through Parliament also seeks to supervise crypto as regulated financial activities.
The Treasury Committee said it was “concerned” about the plan.
“With no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like bitcoin more closely resembles gambling than a financial service, and should be regulated as such,” Harriett Baldwin, member of Parliament and chair of the Treasury Committee said in the statement. “By betting on these unbacked ‘tokens,’ consumers should be aware that all their money could be lost.”
The global crypto market was worth around $3 trillion dollars in 2021 before billions were wiped out in a subsequent market crash propelled by the collapse of stablecoin issuer Terra and later by the fall of crypto exchange FTX.
The country’s finance ministry, however, stands by its proposal to regulate crypto as financial services.
“Risks posed by crypto are typical of those that exist in traditional financial services and it’s financial services regulation – rather than gambling regulation – that has the track record in mitigating them,“ a spokesperson for the ministry said in an emailed statement to CoinDesk. “Crypto offer opportunities but we are taking an agile approach to robustly regulating the market, addressing the most pressing risks first in a way that promotes innovation.”
Crypto advocates too are already disagreeing with the committee’s call to regulating certain crypto as gambling.
“Modern regulated economies must confront and engage with the evolution of finance, and develop a sophisticated regulatory regime which is not achieved by dismissing crypto investment as gambling,” Richard Cannon, partner at U.K.-based Stokoe Partnership Solicitors told CoinDesk in a statement.
The committee, in its statement, called for the government to keep pace with developments of potentially productive innovations that could come from the technologies underlying crypto assets.
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