The report warns individuals betting on asset prices of the possibility of losing all their money.
After conducting a new investigation into the industry, the Treasury committee of the UK parliament has recommended that cryptocurrency trading be regulated as gambling instead of a financial service. In a report released on Wednesday, MPs emphasized the importance of the government avoiding the misuse of taxpayer funds on promoting technologies like digital tokens without demonstrating clear public benefits. The report also highlighted that cryptocurrency trading and investing can be addictive, similar to gambling. While the underlying blockchain technology holds potential for the broader financial services sector, MPs cautioned that speculating on the unpredictable value of unsupported assets like bitcoin could result in significant financial losses for consumers.
Conservative MP and Chair of the Treasury committee, Harriett Baldwin, emphasized the necessity of effective regulation to safeguard consumers and foster meaningful innovation within the UK’s financial services industry. She stated that due to the lack of intrinsic value, extreme price fluctuations, and absence of tangible social benefits, consumer trading of cryptocurrencies, such as bitcoin, bears a closer resemblance to gambling than a financial service, and thus should be subject to regulation as such.
Consumers engaging in speculation with these unsupported “tokens” should be fully aware of the possibility of losing all their invested funds.
These recommendations could impact the government’s forthcoming plans for cryptocurrency regulation, which are currently under consideration following a consultation held earlier this year.
The Treasury committee expressed concern that categorizing cryptocurrency trading or investing as a financial service and subjecting it to regulation by the Financial Conduct Authority (FCA) could potentially create a misleading perception of safety among consumers. They referred to this as a “halo effect” where individuals might believe the industry is safer than it actually is and that they are protected from financial losses, which may not be the case.
The report proposed that regulating cryptocurrencies as gambling would align with the government’s principle of “same risk, same regulatory outcome.”
According to a spokesperson from the Treasury, the risks associated with cryptocurrencies are similar to those found in traditional financial services, and historical evidence suggests that financial services regulation, rather than gambling regulation, has been effective in addressing these risks.
