Bitcoin, the world’s largest cryptocurrency, has skyrocketed in 2023.
Chris Ratcliffe | bloomberg | Getty Images
British lawmakers have said that trading in cryptocurrencies is like gambling and should be treated as such.
Lawmakers on the UK Treasury Select Committee said in a report published on Tuesday that unbacked tokens such as bitcoin and ether are not backed by an underlying asset and have no “intrinsic value.”
With a combined market capitalization of $737.7 billion, bitcoin and ether alone account for two-thirds of all cryptocurrencies.
The events of the past year in the cryptocurrency industry — from the collapse of cryptocurrency exchange FTX to the downturn in the stablecoin experiment Terra — have drawn intense scrutiny from regulators, who are worried about negative impacts on consumers.
In its report on Tuesday, the Treasury Select Committee said that increased volatility and the potential for losing huge sums of money mean that cryptocurrencies pose significant risks to consumers, the committee said.
“Since unsupported retail cryptocurrency 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 to consumers by the crypto-asset industry, large portions of which are still from the Wild West,” said Harriet Baldwin, chair of the Treasury Select Committee, Tuesday. She added: “There is clearly a need for effective regulation to protect consumers from harm, as well as support productive innovation in the UK financial services industry.”
However, with no intrinsic value, high price volatility and no apparent social benefit, consumer trading in cryptocurrencies such as Bitcoin is more like gambling than a financial service, and should be regulated as such. Subsidized, consumers should be aware that all their money could be lost.”
About 10% of adults in the UK own or hold cryptocurrency, according to UK tax agency HM Revenue & Customs.
The Treasury Committee said it was concerned about government proposals to regulate consumer cryptocurrency trading as a financial service. The lawmakers said this would create a “halo” effect leading people to believe that cryptocurrency trading is safe and protected, when this is not the case.
In February, the government outlined plans to regulate crypto assets and opened its proposals for consultation, which closed its window on April 30.
Such a regulatory framework would potentially allow crypto firms to apply for licenses intended to operate in the UK — historically, a major point of contention for UK firms. The Financial Conduct Authority, the de facto regulator for cryptocurrency companies under the country’s money laundering regime, has set a high standard for approving crypto licenses.
Blair Halliday, UK managing director of the largest US-based cryptocurrency exchange Kraken, said: “We fundamentally disagree with the Treasury Select Committee’s conclusion that crypto assets have no intrinsic value. It is unfortunate that the Committee does not support the opportunity for the UK to be a true global leader in our rapidly evolving industry.”
“We firmly believe that the UK government and the Financial Conduct Authority (FCA) are on the right track to develop proportionate regulations that support innovation while creating the necessary buffers and protecting customers,” Halliday added. “Kraken will continue to collaborate with lawmakers to help achieve these goals.”
In April, a senior UK government official told CNBC that he expects to see specific regulation of cryptocurrency in the UK in the next 12 months.
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