British lawmakers call for treating cryptocurrency trading as gambling

British lawmakers have stressed that trading in cryptocurrencies should be equated with gambling because of their similarities. In a report released Tuesday, a U.K. Treasury Select Committee said that unsecured tokens such as bitcoin and ether have no underlying assets and "no intrinsic value." These two cryptocurrencies alone account for two-thirds of the cryptocurrency market's total capitalization, which currently stands at $737.7 billion.

 

Regulators are increasingly scrutinizing the crypto industry, especially in light of the events of the past year, such as the collapse of crypto exchange FTX and the decline of the Terra stable coin experiment. Concerned about the negative impact on consumers, regulators recognize the significant risks associated with cryptocurrencies. The Treasury Select Committee's report highlights the increased volatility and potential for significant financial losses, leading the committee to assert that cryptocurrencies pose significant risks to consumers.

 

In light of these risks, lawmakers called on the government to regulate trading in unsecured cryptocurrencies as gambling rather than as a financial service. Harriett Baldwin, chair of the Treasury Committee, stressed the need for effective regulation to protect consumers and support innovation in U.K. financial services. Baldwin stated: "By betting on these unsecured 'tokens,' consumers should know that all their money could be lost."

 

According to HM Revenue & Customs, about 10 percent of British adults currently own or have owned cryptocurrencies. The Treasury Committee has expressed concern about the government's proposals to regulate consumer trading in cryptocurrencies as a financial service, arguing that such an approach could create a misleading impression that cryptocurrency trading is safe and secure.

 

In February, the government outlined plans to regulate crypto-assets and sought public consultation, which ended April 30. The proposed regulatory framework could potentially allow cryptocurrency companies to obtain special licenses to operate in the U.K. However, obtaining such licenses has historically been a contentious issue for UK companies, as the Financial Conduct Authority, the de facto regulator of cryptocurrency companies as part of the country's anti-money laundering regime, has set high standards for approving cryptocurrency licenses.

 

In response to the Treasury Select Committee's findings, Blair Halliday, UK managing director of leading U.S. cryptocurrency exchange Kraken, disagreed with the claim that cryptoassets have no intrinsic value. Halliday noted the opportunity for the U.K. to become a global leader in the rapidly evolving crypto industry and expressed support for government and Financial Conduct Authority efforts to establish proportionate rules that foster innovation while providing the necessary safeguards and customer protections.

 

In April, a senior U.K. government official told CNBC that specific regulations on cryptocurrencies in the U.K. were expected within the next 12 months.