A UK Treasury Select Committee has suggested the country regulate cryptocurrency trading as a form of gambling rather than a financial service.
MPs said on Wednesday 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 MPs has said that cryptocurrency trading and investment can be as addictive as gambling.
While acknowledging that the underlying blockchain technology could benefit the wider 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 Harriet Baldwin, Conservative MP and Chair of the Treasury Committee.
“However, with no intrinsic value, huge price volatility, and no discernible social good, consumer trading of cryptocurrencies such as Bitcoin is more like gambling than financial services and should be regulated as such.”
The announcement comes after the UK Treasury earlier this year announced “ambitious plans to tightly regulate cryptocurrency activities” 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 MPs said that a better approach would be to recognize that crypto-assets are “more like gambling than financial services”. They recommended that the protection rules that control lotteries, bookmakers and casinos be applied to crypto companies.
The MPs said they were concerned that regulation of the financial services industry would “create a ‘halo’ effect, leading consumers to believe that the activity is safer than it is or protected when it is not”.
They said regulating cryptocurrencies as gambling would be in line with the government’s “same risk, same regulatory outcome” policy.
The Treasury Select Committee is appointed by the House of Commons to scrutinize the spending, management and policies of the UK Treasury, but it has no power to set government policy.
Crypto advocates oppose the committee’s report
Some crypto associations and bodies have spoken out against the recent ad hoc committee report.
Ian Taylor, Board Advisor at CryptoUK, the UK self-regulatory trade association representing the crypto-asset sector, said that these statements are “unhelpful, false, fundamentally false and unsubstantiated.”
“Professional investment managers see 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.”
The cryptoguru also mentioned that the UK receives tens of millions of pounds in tax revenue from digital assets. But the government could lose that revenue if it regulates cryptocurrencies like gambling, as the latter are exempt from capital gains tax.
