Regulate Crypto Just Like Gambling, UK Treasury Committee Says

UK Treasury invokes an age-old bear case for crypto: “unbacked” digital assets have no intrinsic value, more like gambling than finance

article-image

Ivan Berrocal/Shutterstock modified by Blockworks

share

Critics have often labeled investing in crypto something akin to gambling. But if UK lawmakers get their way, the industry could soon be regulated in much the same way as casinos.

A new report from a group of UK parliamentary representatives outlines perceived risks associated with unbacked crypto assets, emphasizing a supposed lack of intrinsic value and extreme price volatility.

The findings suggest these traits expose consumers to significant gains or losses, resembling gambling more than a financial service.

“We are concerned that regulating retail trading and investment activity in unbacked crypto assets as a financial service will create a ‘halo’ effect that leads consumers to believe that this activity is safer than it is, or protected when it is not,” the Parliament’s Treasury Committee said in a House of Commons committee report published May 17.

The report cites bitcoin (BTC) and ether (ETH) as examples of “unbacked crypto assets,” apparently delineated from asset-backed tokens such as stablecoins USDC, tether or even Pax Gold.

CryptoUK, a crypto trade association, said it strongly disagreed with the recommendation, arguing that this approach would overlook the sector’s intricacies and its potential for attracting investment and fostering economic growth for the UK economy.

“No other global jurisdiction has taken this approach and referencing MiCA in the EU, we need to be taking a bespoke and tailored approach for regulation within the industry to ensure the UK does not become a hostile environment for businesses to be domiciled,” the organization said in a statement. 

“Likewise, this approach will not provide the right level of protection for UK consumers — they will likely take opportunities to invest and transact with non-UK organizations which is wholly against the objective of protecting these consumers through regulation.”

Ian Taylor, board advisor at CryptoUK, highlighted the contradiction between the Treasury’s statement and HM Treasury’s consultation proposals. The proposals aim to bring activities, such as operating trading venues and serving as intermediaries, within the scope of existing financial regulations.

“Professional investment managers see bitcoin and other crypto assets as a new alternative investment class — not as a form of gambling — and institutional adoption of unbacked crypto assets has increased significantly,” Taylor said.

“Furthermore, gambling is exempt from capital gains tax. Does the Government really wish to exclude tens of millions of pounds in tax income from gains made by the buying and selling of unbacked crypto assets?”

Blockworks has reached out to the UK’s finance ministry for comment.

Gambling or not, UK Treasury digs cross-border crypto

In February, the UK government published a consultation paper to establish a regulatory framework for crypto assets, aiming to stabilize the industry.

This followed its announcement last year to introduce regulations for stablecoins and crypto assets used in payments through the Financial Services and Markets Bill.

The Treasury’s statement on likening crypto markets to gambling is not a new perspective. Todd H. Baker, a lecturer in law at Columbia Law School, wrote a blog last year comparing crypto trading to professional esports gambling, and encouraged policymakers to regulate it as such.

Not to mention, billionaire investor Warren Buffett has famously referred to bitcoin as a “gambling token.”

The Treasury committee did acknowledge potential benefits associated with certain types of crypto assets. Among the most compelling use cases it mentioned were crypto’s ability to boost payment efficiency and reduce costs, particularly for cross-border transactions and in economically disadvantaged regions.

“We therefore welcome the government publishing proposals for how it plans to regulate crypto assets used in financial services,” the Treasury said.

However, the committee said the government should refrain from allocating public resources to support crypto asset activities that lack a clear and beneficial purpose. They pointed to the Royal Mint’s plan to launch an NFT, which was scrapped this year.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Templates.png

Research

ZKPs enable efficient offchain transaction processing and validation, resulting in increased throughput and reduced fees. Solana's ZK Compression leverages ZKPs to minimize onchain storage costs, while Sui's zkLogin streamlines user onboarding by replacing complex key management with familiar OAuth credentials.

article-image

North Korea suspected in breach of Indian exchange’s multisig wallet

article-image

Plus, Sanctum’s CLOUD token has officially launched — but not without problems

article-image

It’s not yet clear whether Donald Trump is pumping bitcoin. But an unofficial memecoin is still seeing benefit.

article-image

StarkWare takes a step towards making StarkNet for Bitcoin

article-image

The numbers point to one conclusion: Risk is back, or at least it was during the first half of the year