IMPORTANT POINTS:
- UK lawmakers suggest that cryptocurrency trading resembles gambling and should be regulated as such.
- There is concern about government proposals to regulate cryptocurrency trading as a financial service, as it could create a misleading perception of safety and security.
- The UK is expected to implement cryptocurrency regulations in the next 12 months, which would allow companies in the sector to apply for licenses to operate in the country.
Tokens like bitcoin and ether are not backed by underlying assets and lack “intrinsic value,” according to lawmakers on the UK Treasury Select Committee, in a report released Tuesday.
With a combined market capitalization of $737.7 billion, bitcoin and ether make up two-thirds of all cryptocurrencies.
Events of the last year in the cryptocurrency industry, from the crash of the FTX exchange to the collapse of the Terra stablecoin, have generated increased attention from regulators, who are concerned about the negative effects on consumers.
In its report released Tuesday, the Treasury Select Committee claimed that high volatility and the potential to lose large sums of money means that cryptocurrencies pose a great risk to consumers. “As cryptocurrency retailing more resembles gambling than a financial service, Members of Parliament urge the government to regulate it as such,” the lawmakers said.
“The events of 2022 have highlighted the risks consumers face from the crypto industry, large parts of which remain like the Wild West. It is clear that effective regulation is needed to protect consumers from danger, as well as to support productive innovation in the UK financial services industry.”
“However, due to the lack of intrinsic value, high price volatility, and the absence of any discernible social benefit, trading cryptocurrencies like Bitcoin is more akin to gambling than a financial service and should therefore be regulated as such. By betting on these unbacked tokens, consumers should be aware that they could lose all their money.”Harriett Baldwin, chairwoman of the Treasury Select Committee.
According to the UK Revenue Agency, around 10% of adults in the country hold or have held cryptocurrency.
The Treasury committee expressed concern over government proposals to regulate cryptocurrency trading as a financial service. According to lawmakers, this would create a “halo” effect that leads people to believe that cryptocurrency trading is safe and secure, when in fact it is not.
Such a regulatory framework would potentially allow cryptocurrency companies to apply for licenses to operate in the UK, which has been a point of contention for companies in the country. The Financial Conduct Authority, which is the de facto regulator for cryptocurrency companies under the country’s anti-money laundering regime, has set a high standard for the approval of cryptocurrency licenses.
“We take issue with the Treasury Committee’s conclusion that crypto assets have no intrinsic value. It is unfortunate that the committee does not support the opportunity for the UK to be a true global leader in our rapidly developing industry.
We strongly believe that the UK government and the FCA are on the right track to develop regulations that support innovation while providing the necessary protections for customers. Kraken will continue to collaborate with policymakers to help achieve these goals.”Blair Halliday, UK director of the top US cryptocurrency exchange Kraken.
In April, a senior UK government official told CNBC that he expected to see specific cryptocurrency regulations in the UK in the next 12 months.
