The Treasury Committee made the recommendation while describing digital currencies as having “no intrinsic value and no useful social purpose”.
By Daniel Binns, business journalist
Wednesday, May 17, 2023 2:11 a.m., United Kingdom
An influential panel of MPs has called on the government to regulate crypto trading and consumer speculation as a type of gambling.
The cross-party treasury committee has claimed digital currencies such as Bitcoin and Ether have “no intrinsic value and no useful social purpose” – and in addition to consuming large amounts of energy, they are often used by criminals for scams.
It comes after the the government announced proposals in February to regulate the crypto industry subjecting it to the law on financial services.
But MPs said a better approach would be to recognize how speculation in unbacked crypto-assets – like Bitcoin – “more closely resembles game than a financial service”.
He recommended that safeguard rules that monitor the likes of lotteries, betting companies and casinos apply instead.
Around 10% of UK adults have speculated in crypto-assets, according to HM Revenue and Customs.
The committee’s new report warned that digital currencies pose a “significant risk” due to “enormous” price volatility, with the potential for customers to lose everything they invest.
He said there was evidence that addictions to cryptocurrency speculation was on the rise – and warned that there are currently limited controls to protect vulnerable consumers.
MPs said they were concerned that subjecting the industry to financial services regulation ‘would create a ‘halo’ effect which leads consumers to believe that this activity is safer than it is , or protected when it is not”.
“We therefore strongly recommend that the government regulate retail and investment activities in unsecured crypto-assets as gambling rather than a financial service, in accordance with its stated principle of ‘same risk, same result’. regulatory,” the report adds.
A “Wild West” industry
It comes after a 2018 report by the committee described the cryptocurrency industry as a ‘Wild West’ – with MPs saying nothing in their subsequent investigations had caused them to change that verdict.
Following the new report, committee chair, Conservative MP Harriett Baldwin, said: “Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the service sector. finance in the UK.
“However, in the absence of intrinsic value, enormous price volatility, and no discernible social good, the consumer commerce of cryptocurrencies like Bitcoin is more like gambling than a financial service, and should be regulated as such.”
MPs said they still believed there was potential in the technology – for example in improving the efficiency and costs of payments – and advised the government to take a ‘balanced approach’ to supporting the innovation.
The committee added that it is separately examining the potential role of central bank-backed digital currencies.
Meanwhile, his report also criticized government policy attempt in April 2022 to launch a non-fungible token (NFT) – a type of cryptocurrency asset – through the Royal Mint. The plan was scrapped earlier this year following a review.
MPs said the government “should seek to avoid spending public resources to support crypto-asset activities without a clear and beneficial use case”.
Crypto “offers opportunities”
This comes as the government considers responses to a consultation in its regulatory proposals.
A Treasury spokesman said ministers would likely reject the committee’s recommendation.
They told Sky News: “The risks posed by crypto are typical of those in traditional financial services and it is financial services regulation – rather than gambling regulation – that has been proven to mitigate them.
“Crypto offers opportunity, but we are taking an agile approach to vigorously regulating the market, addressing the most pressing risks first in a way that fosters innovation.”
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The report comes amid growing pressure on governments around the world to better regulate the industry, bolstered by the sudden bankruptcy of the FTX crypto platform in November.
Some 80,000 UK-based customers were affected by the collapse, and a UK investor was left with a £1million hole in his finances.
The European Union this week approved tougher rules on crypto-assets – including new powers to ban exchanges that fail to protect consumers.
The International Organization of Securities Commissions (IOSCO), whose members include regulators in the United States and the United Kingdom, said it would also soon announce proposals for the first-ever set of global rules covering securities trading. cryptography.