The UK Treasury Board has issued a comprehensive report advocating for the government to reclassify retail crypto trading. The report contends that instead of being treated as a financial asset, crypto trading should be regulated as a gambling instrument.
This recommendation has sparked a heated debate among lawmakers and industry stakeholders, as it challenges the prevailing perception of cryptocurrencies as investment vehicles.
Reclassifying Crypto Trading as Gambling
The report, consisting of 28 pages and compiled by cross-party lawmakers, specifically calls for mainstream cryptocurrencies such as Ethereum (ETH) and Bitcoin (BTC) to be regulated akin to gambling instruments.
The central argument put forth by the commission of the Ministry of Finance is that the intrinsic nature of these crypto assets renders them highly susceptible to dramatic fluctuations in value. Consequently, consumers face an imminent risk of losing their entire investment, which mirrors the characteristics of gambling.
Lawmakers contend that the potential exploitation of cryptocurrencies by fraudsters and money launderers poses a significant threat to consumers and economic stability. Moreover, they assert that the inherent volatility associated with crypto trading aligns more closely with the realm of sports betting rather than traditional forms of investment.
Harriett Baldwin, a member of Parliament and chair of the Treasury Committee, emphasized this sentiment, stating, "With no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like bitcoin more closely resembles gambling than a financial service, and should be regulated as such.
By betting on these unbacked 'tokens,' consumers should be aware that all their money could be lost."
🚨 Published today 🚨
🪙 We’ve just published our report on cryptoassets, setting out our recommendations for the Government’s approach to regulating this market.
📗 Learn more and read the report in full 👇https://t.co/CK7CVH2pQ1 pic.twitter.com/GvDQfiGhPU — Treasury Committee (@CommonsTreasury) May 16, 2023
The Future of Cryptocurrency Regulation in the UK
The Board's primary concern is that categorizing consumer crypto trading as a financial service, as proposed by the government, could create a misleading "halo" effect.
This effect could potentially mislead consumers into believing that their participation in such activities is safe and secure when, in fact, it is not. However, the report does acknowledge the potential benefits of blockchain technology, which serves as the foundation of cryptocurrencies, for the UK's financial sector.
Unsurprisingly, the report's findings have triggered a strong backlash from the trade association CryptoUK, which vehemently rejects the panel's conclusions. This highlights the deep divide between those who view cryptocurrencies as a legitimate investment avenue and those who consider them to be speculative tools that bear resemblance to gambling instruments.