UK authorities should regulate cryptocurrency trading as a form of gambling rather than a financial service, parliament's Treasury committee has said after a new inquiry into the industry.
The government must avoid wasting more taxpayer funds promote technological innovations such as digital tokenswithout demonstrating clear benefits to the public, the lawmakers said in a report published on Wednesday.
Like gambling, trading and investing in cryptocurrencies can be addictive, the MPs concluded. And while the underlying blockchain technology could benefit the financial services industry as a whole, the process of betting on the volatile price of unbacked assets such as bitcoin could lead to consumers losing sums of money that they would change life.
โEffective regulation is clearly needed to protect consumers from harm, as well as support productive innovation in the UK financial services industry,โ said Conservative MP and Treasury committee chair Harriett Baldwin. โHowever, with no intrinsic value, high price volatility, and no discernible social good, consumer trading in cryptocurrencies like bitcoin looks more like gambling than a financial service, and should be regulated as such.
"When gambling on these unbacked tokens, consumers should be aware that they could lose all their money."
The recommendations could influence government plans to regulate cryptocurrencies, which are being considered after a consultation earlier this year.
It was widely expected that cryptocurrency trading would eventually fall under the Financial Conduct Authority โ which is currently responsible for ensuring companies comply with money laundering rules, and will soon be tasked with monitoring advertisements.
However, the Treasury committee said that treating cryptocurrency trading or investing as a financial service, and regulating it through the FCA, risks creating a "halo effect" that could lead consumers to believe that the industry is "safer than it is" or that they are protected. of financial losses, when they are not.
The report said that regulating cryptocurrencies as gambling would be consistent with the government's principle of "same risk, same regulatory outcome."
The report also attacked the recent government attempt to produce a non-fungible token through the Royal Mint. NFTs are unique digital assets stored on a blockchain, the same decentralized ledger of transactions used to buy and sell cryptocurrencies like bitcoin. However, the project, which Labor had criticized as a "crypto hack", was scrapped in marchjust under a year after the project was announced.
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The Treasury committee said it was calling on the government to take a "balanced approach" to the technology and "avoid spending public resources supporting crypto-asset activities without a clear and beneficial use case," adding that the failed NFT project was "a case in point". โ.
It said: "It is not the role of government to promote particular technological innovations for their own good."
The Treasury and industry group CryptoUK have been contacted for comment.
