Bitcoin, the largest cryptocurrency in the world, rose stealthily in 2023.
Chris Ratcliffe | Bloomberg | Getty Images
Cryptocurrency trading is akin to gambling and should be treated as such, UK lawmakers have said.
Unbacked tokens like bitcoin and ether aren’t backed by underlying assets and have “no intrinsic value,” lawmakers from Britain’s Treasury Select Committee said in a report released on Tuesday.
With a combined market cap of $737.7 billion, bitcoin and ether alone account for two-thirds of all cryptocurrencies.
Events of the past year in the crypto industry – from the fall of crypto exchange FTX to the decline of stablecoin experiment Terra – have drawn intense scrutiny from regulators, who are concerned about negative effects on consumers.
In its report Tuesday, the Treasury Select Committee said increased volatility and the potential to lose huge sums of money means cryptocurrencies pose significant risks to consumers, the committee said.
“Given that unsupported crypto retail is more like gambling than a financial service, MPs are calling on the government to regulate it as such,” the lawmakers said.
“The events of 2022 have highlighted the risks posed to consumers by the crypto-asset industry, much of which remains a Wild West,” said Harriett Baldwin, chair of the Treasury Select Committee, on Tuesday. “Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK financial services industry,” she added.
“However, in the absence of intrinsic value, enormous price volatility, and no discernible social good, the consumer commerce of cryptocurrencies like Bitcoin is more like gambling than a financial service, and should be regulated as such. When betting on these unbacked “tokens”, consumers should be aware that all of their money could be lost.”
Around 10% of UK adults hold or have held cryptocurrency, according to UK tax agency HM Revenue & Customs.
The Treasury committee said it was concerned about government proposals to regulate consumer crypto trading as a financial service. This, lawmakers said, would create a “halo” effect that leads people to believe crypto trading is safe and secure, when it is not.
In February, the government presented plans to regulate crypto assets and opened its suggestions for a consultation whose window closed on April 30.
Such a regulatory framework would potentially allow crypto firms to apply for bespoke licenses to operate in the UK – historically, a major point of contention for UK businesses. The Financial Conduct Authority, which is the de facto regulator of crypto businesses under the country’s money laundering regime, has set the bar high for crypto license approvals.
Blair Halliday, UK Managing Director of leading US crypto exchange Kraken, said: “We fundamentally disagree with the conclusion of the Treasury Select Committee that crypto-assets have no intrinsic value. It is unfortunate that the committee does not support the UK’s opportunity to be a a true global leader in our rapidly developing industry.”
“We are confident that the UK government and the FCA are on the right track to craft proportionate regulations that support innovation while establishing the necessary safeguards and customer protections,” Halliday added. “Kraken will continue to work with lawmakers to help achieve these goals.”
In April, a senior UK government official told CNBC that he expected to see specific regulation for UK crypto in the next 12 months.
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