The UK Treasury has rejected proposals submitted by an all-party committee in May to regulate crypto trading in the same way as gambling.
A report published by the committee largely condemns cryptocurrencies, saying they have “no intrinsic value and serve no useful social purpose, while consuming large amounts of energy and being used by criminals in scams, fraud and money laundering.” The report also claims “cryptocurrencies pose significant risks to consumers, given their price volatility and the risk of losses,” and “retail trading in unbacked crypto more closely resembles gambling than a financial service.”
Yesterday, the Treasury published a letter in response to the report, saying that although it “recognises many of the consumer risks described in the report, as well as the pressing need for robust and effective regulation,” it does not accept the recommendation to regulate cryptocurrency as gambling.
“HM Treasury firmly disagrees with the Committee’s recommendation to regulate ‘retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service,’” it said.
“Such an approach would run completely counter to globally agreed recommendations from international organisations and standard-setting bodies, including the International Organization of Securities Commissions (IOSCO)1 and the G20 Financial Stability Board (FSB)2. These recommendations are grounded in the principle of ‘same activity, same risk, same regulatory outcome’, meaning that any cryptoasset activity that performs a similar function, and poses similar risks, to those in the traditional financial system (for example, operating a trading platform or providing custody services) are subject to regulation that ensures equivalent outcomes.”
The Treasury argues that the financial regulatory system is a better fit for crypto because gambling regulation would fail to address market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.
The full response to the proposals can be viewed here.
