The volatility and purported lack of intrinsic value of most crypto assets make it particularly risky for consumers, the politicians claimed.
The trading of so-called “unbacked cryptoassets” such as Bitcoin and Ether should be regulated as gambling rather than a financial service, a panel of British lawmakers said in a new report.
The United Kingdom is currently working on a crypto regulatory framework that would mix existing financial asset laws with new crypto-specific rules.
However, in a May 17 House of Commons Committee report, the U.K. Treasury Committee “strongly recommended” regulating retail crypto trading and investment activity as gambling, consistent with the principle of “same risk, same regulatory outcome.”
It argued the price volatility and lack of intrinsic value mean unbacked crypto assets will “inevitably pose significant risks to consumers.”
Treasury Committee Chair Harriett Baldwin described Bitcoin and Ether as accounting for two-thirds of the total market capitalization of crypto assets, both of which she claimed are “unbacked.”
In the U.K., all gambling — whether online or land-based — is regulated by the Gambling Commission under the Gambling Act 2005. Its oversight includes businesses such as bingo halls, lotteries, betting shops, online betting companies and casinos, with the aim to prevent problem gambling and apply Anti-Money Laundering safeguards.
In its arguments, the lawmakers referred to written statements from Dr. Larisa Yarovaya, an associate professor from the University of Southhampton, who said crypto exchanges, online trading platforms and other crypto-asset businesses should be regulated with the same stringency as crypto speculation “can be addictive.”
In a small win for crypto, the committee said it also recognized the potential for some crypto assets and their underlying technology to bring benefits to financial services and markets — such as reducing the cost of cross-border payments and improving financial inclusion.