In a report released on Wednesday, UK lawmakers recommended treating cryptocurrencies like Bitcoin and ether as gambling due to the risks they pose to consumers and their potential use by fraudsters. The report calls for regulatory measures to address the volatility and lack of backing behind these digital assets, citing concerns about investor protection.
The treasury committee of the UK Parliament emphasized that regulating retail trading and investment in unbacked cryptocurrencies as gambling would align with the principle of ensuring a consistent regulatory outcome for activities with similar risks. The report highlights the need for consumer awareness regarding the speculative nature of crypto investments and the potential for total loss of invested funds.
The Financial Conduct Authority (FCA) has consistently cautioned individuals about the high risks associated with cryptocurrencies, warning that investors could lose all their money. The collapse of the FTX exchange in the past year has further emphasized the urgent need for effective regulation in the crypto industry.
While cryptoassets represent a relatively small portion of the overall financial system, with a total market capitalization of approximately $1.2 trillion globally, the report underlines the need for consumer protection in an industry that remains largely unregulated. The treasury committee’s chair, Harriett Baldwin, referred to significant risks in the cryptoasset industry and described certain aspects as akin to the “wild west.”
The report also acknowledges the potential of the underlying technology behind cryptocurrencies to enhance efficiency in payment systems. However, it emphasizes the importance of addressing the risks and protecting consumers in light of the industry’s speculative nature.
As the European Union recently approved comprehensive rules for crypto markets, and international regulators are expected to propose global norms soon, the UK lawmakers’ call for gambling-like regulation of cryptocurrencies aligns with efforts to establish consistent regulatory frameworks at a broader scale.