In a recent report, a British parliamentary committee recommended that cryptocurrencies such as bitcoin and ethereum be considered gambling because they pose significant risks to consumers.
The report comes as the UK aims to establish itself as a global center for cryptocurrencies and their underlying blockchain technology, with plans to introduce the first set of regulations for crypto assets. Currently, cryptocurrencies are only subject to anti-money laundering safeguards.
Bitcoin and ethereum account for two-thirds of all crypto assets and are not backed by any currency or asset, leading to price volatility that puts all investments at risk of being wiped out, according to a report by a parliamentary treasury committee.
The committee expressed concern that unsafe retail transactions and cryptocurrency investments could give consumers a “false illusion” of safety or protection, leading them to believe the activities are safer than they really are.
To address these risks, the committee strongly recommends that the government regulate retail trading and investment activities involving unsecured cryptoassets as gambling rather than as financial services, based on the principle of “same risk, same regulatory outcome” they advocate.
Given the high risks associated with cryptocurrencies, such an approach would provide consumers with appropriate oversight and protection.
The UK’s ambition to become a global center for cryptocurrency and blockchain technology stems from a recognition of the transformative potential of these innovations.
However, governments and regulators recognize the need to strike a balance between promoting innovation and ensuring consumer protection.
By classifying unsecured crypto assets as gambling, the UK aims to bring them into compliance with regulations that address the associated risks and provide a safer environment for consumers.
In addition to the proposed regulatory measures, the UK government is also considering initiatives to promote responsible cryptocurrency use and improve public financial literacy.
This multifaceted approach is designed to build confidence in the cryptocurrency market and enable individuals to make informed decisions about their involvement in cryptocurrencies.
Despite the rapid growth and adoption of the cryptocurrency industry globally, concerns about investor protection and the potential for illicit activity have prompted global regulators to reassess their regulatory frameworks.
The U.K.’s move to treat certain crypto assets as gambling reflects an aggressive stance on consumer protection in the fast-growing digital financial sector.