The UK government has taken a strong stance against categorising consumer trading in unbacked cryptoassets as gambling. This comes in response to a recent report by the Treasury Committee, which suggested regulating crypto trading as gambling rather than a financial service.
The Committee’s report, published in May, said cryptocurrencies such as Bitcoin have no intrinsic value and serve no useful social purpose, while consuming large amounts of energy and being used by criminals in scams, fraud and money laundering.
But in a written response to the Committee’s concerns, Andrew Griffith, Economic Secretary to the Treasury, stated that such regulation would be contrary to global standards and could drive crypto asset activity offshore.
His letter said: “The Committee’s proposed approach would therefore risk creating misalignment with
international standards and approaches from other major jurisdictions including the EU, and potentially create unclear and overlapping mandates between financial regulators and the Gambling Commission.
“A system of gambling regulation could also fail to appropriately mitigate many of the critical risks that were discussed in HM Treasury’s recent consultation on cryptoasset regulation—including those associated with market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.”
The government argues that a gambling regulatory framework might not effectively address critical risks associated with cryptoassets, such as market manipulation and inadequate prudential arrangements.
Instead, HM Treasury advocates for a financial services regulatory framework to mitigate the risks of unbacked cryptoassets and promote safe innovation.
Measures are already in place, including the introduction of the UK’s cryptoasset anti-money laundering and counter-terrorist financing regime and dedicated financial promotions legislation for cryptoassets.
‘Trust is needed’
The UK Treasury Committee‘s recommendation of regulating consumer trading in unbacked crypto as gambling had also sparked a significant backlash from industry experts.
Commenting on the government’s rebuffal, Olivier Fines, head of advocacy EMEA at CFA Institute on regulating the crypto industry, said: “A strong regulatory framework needs to be established for the benefit of both crypto providers and users.
“Policymakers must either agree on the application of existing laws to various components in the crypto ecosystem or craft new laws to fill in any gaps. Trust in the integrity of crypto markets is essential to attract investors and build crypto networks to scale.”