The UK Government has announced its decision to regulate retail trading in unbacked cryptoassets as gambling, contrasting with the Treasury Committee’s recommendation to regulate it as a financial service. The Committee’s report called for consumer trading in unbacked crypto to be treated as gambling due to its price volatility and potential for losses. However, the Government believes that regulating it as a financial service would create a misleading ‘halo’ effect, falsely assuring consumers that the activity is safe and protected.
Concerns Over Potential Impact on Financial Innovations
Unbacked cryptoassets, which include cryptocurrencies like Bitcoin and Ether, do not have any underlying assets supporting them. These digital currencies account for two-thirds of all cryptoassets and have gained significant popularity. The MPs expressed concerns that regulating consumer crypto trading as a financial service might hinder potentially productive innovations in the financial services sector that are enabled by the underlying technologies of cryptoassets.
“UK Government to regulate retail crypto trading as gambling, defying committee’s recommendation. ”
Committee Argues for Aligning Crypto Trading with Gambling
Despite the Government’s decision, the Treasury Committee argued that treating consumer trading in unbacked crypto as gambling would align it more closely with the level of risk and speculative nature associated with this activity. The Committee also emphasized the need for the Government and regulators to keep up with developments in the crypto industry to ensure that any regulatory measures do not unduly constrain the potential benefits brought by these technologies in areas such as cross-border transactions and payments in less developed countries.
