A special committee of the British Treasury suggested that the country regulate cryptocurrency trading as a form of gambling, and not as a financial service.
On Wednesday, lawmakers said that digital currencies such as bitcoin and ether “have no intrinsic value and no useful social purpose,” arguing that they are more like gambling than financial services.
An influential group of deputies said that cryptocurrency trading and investments can be addictive, just like gambling.
Acknowledging that the underlying blockchain technology could benefit the broader financial services industry, they said the process of betting on the volatile prices of unsecured cryptocurrencies could result in consumers losing life-changing amounts of cash.
“Effective regulation is essential to protect consumers from harm and to support productive innovation in the UK’s financial services sector,” said Conservative MP and Head of Treasury Committee Harriet Baldwin.
“However, with no intrinsic value, huge price volatility, and tangible social good, consumer trading of cryptocurrencies such as bitcoins is more like gambling than financial services, and should be regulated as such.”
The announcement came after earlier this year the British Treasury announced the implementation of “ambitious plans to strictly regulate activities with cryptocurrencies” on a par with traditional finance.
“Under plans outlined by the government today (February 1), it will seek to regulate a wide range of crypto-asset activities in line with its approach to traditional finance,” the UK government said at the time.
However, the deputies said that the best approach would be to recognize that crypto assets are more like gambling than financial services. They recommended applying protection rules controlling lotteries, bookmakers and casinos to crypto companies.
Members of parliament said they were concerned that regulation of the financial services industry “will create a halo effect that will make consumers believe that this activity is safer than it is, or protected when it is not.”
They said that the regulation of cryptocurrencies as gambling would correspond to the government policy of “same risk, same regulatory result”.
The Special Treasury Committee is appointed by the House of Commons to scrutinize the expenditure, management and policy of the UK Treasury, but has no authority to determine government policy.
Crypto defenders oppose the committee’s report
Some crypto associations and bodies opposed the recent report of the special committee.
Ian Taylor, Board Advisor at CryptoUK, the British self-regulatory trade association representing the crypto-asset sector, said that these statements are considered “useless, false, fundamentally erroneous and unfounded.”
“Professional investment managers view Bitcoin and other cryptoassets as a new class of alternative investments, rather than a form of gambling, and institutional adoption of unsecured cryptoassets has grown significantly.”
Cryptoguru also reminded that Great Britain receives tens of millions of pounds sterling in tax revenue from digital assets. But the government may lose this income if it regulates cryptocurrency as gambling, since the latter are exempt from capital gains tax.
