UK Parliament’s Finance Committee Wants Crypto Regulated Like Gambling – Ledger Insights

Today, the UK’s cross-party parliamentary finance committee published a report recommending that the government regulate crypto-assets like gambling rather than financial services. It is concerned that the government’s plans to regulate cryptocurrency activities as a financial service will give the sector a halo effect. Therefore, consumers can believe that it is a safe and protected activity.

“With no intrinsic value, high price volatility and no visible social good, consumer trading of cryptocurrencies like Bitcoin is more like gambling than a financial service, and should be regulated as such,” Harriet Baldwin, chair of the Finance Committee, said in a statement. “By betting on these unbacked ‘tokens,’ consumers should be aware that all their money could be lost.”

The position stands in marked contrast to the government’s stance, with current Prime Minister Rishi Sunak proposing that the UK become a global hub for crypto-asset technology during his term as UK Chancellor in April 2022. Given the importance of financial services to the UK economy, the approach is logical. In February, HM Treasury (HMT) opened a consultation on the topic.

A 2021 survey by the regulator, the Financial Conduct Authority (FCA), found that 38% of crypto investors viewed their holdings as a “gamble”. That could be one of the inspirations.

The report also said the FCA needs to follow up after delays in reviewing crypto service providers for AML activities. In addition, it criticized the Royal Mint’s abandoned NFT efforts.

Ahead of the report, there were several hearings on the topic (video).

While the publication focused on cryptocurrency, blockchain fared only slightly better. The committee acknowledged that it could be useful for cross-border payments, but the use of DLT in capital markets was not mentioned. That said, the UK considers security tokens already regulated, so there may be little to debate.

Not surprisingly, the response was swift and definitive. “The Treasury’s statement is in direct conflict with HMT’s consultation proposal to bring activities, including the operation of a trading venue and the performance of intermediation activities, into the existing financial regulatory perimeter,” said Ian Taylor, board advisor to CryptoUK who attended a committee hearing.

“In addition, gambling is exempt from profit tax. Does the government really want to exclude tens of millions of pounds in tax revenue from gains from buying and selling unbacked crypto assets?”

However, Taylor acknowledged the risks involved, saying they can be addressed with education and an appropriate regulatory framework.