UK Government to Regulate Crypto Trading as a Financial Service

JM — Tue, 23 Jan 2024 17:27:33 +0000

The UK Government has responded to the Treasury Committee’s report on Regulating Crypto, announcing its intention to regulate retail trading in unbacked cryptoassets as a financial service. This comes after calls from the cross-party Committee of MPs to classify consumer trading in unbacked crypto as gambling due to its price volatility and risk of losses. The Government’s decision aims to ensure the safety and protection of consumers engaged in crypto trading.

Addressing Concerns and Embracing Potential Benefits

While the Committee raised concerns about the ‘halo’ effect that regulating consumer crypto trading as a financial service may create, the Government argues that such regulation will bring transparency and accountability to the industry. The Government also recognizes the potential benefits of cryptoassets in financial services, particularly for cross-border transactions and payments in less developed countries. It emphasizes the need for regulators to stay updated with technological developments in this space.

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The UK Government aims to ensure the safety and protection of consumers engaged in crypto trading.
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Impact on the Crypto-Asset Industry and Consumer Protection

Approximately 10 percent of UK adults hold or have held cryptoassets, according to HM Revenue & Customs. The Government’s decision to regulate retail trading in unbacked cryptoassets as a financial service aims to provide a regulatory framework that balances the opportunities and risks associated with cryptocurrencies. The move is expected to have a significant impact on the crypto-asset industry in the UK, potentially facilitating innovation while ensuring consumer protection.

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Government to Regulate Crypto Trading as Gambling, Ignoring Committee’s Recommendation

JM — Thu, 18 Jan 2024 21:07:34 +0000

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.

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UK Government to regulate retail crypto trading as gambling, defying committee’s recommendation.
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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.