UK lawmakers may or may not know how the cryptocurrency industry works.
The recommendation comes as regulators are becoming increasingly explicit about the substantial risks these digital assets could pose to consumers.
Members of Parliament are concerned that treating consumer crypto trading as a financial service could mislead consumers into thinking the activity is safe and secure. The cross-party committee argues that the nature of this trade aligns more closely with gambling and should be regulated accordingly.
"Despite the regulatory framework, the inherent price instability and intrinsic valuelessness of unbacked crypto assets will always pose considerable risks to consumers," a Treasury Committee report stated.
Bitget CEO Gracy Chen told Benzinga that the Seychelles-based cryptocurrency exchange believes in the potential of cryptocurrencies to drive financial innovation and economic growth. She urged government-industry collaboration to shape a regulatory environment that protects consumers, combats illicit activities, fosters innovation, and promotes sustainable growth for the cryptocurrency industry.
โBitget is committed to adopting the regulation and implementing a comprehensive set of strict risk control and anti-money laundering policies and procedures,โ it said.
He goes on to state that consumer speculation in unbacked crypto assets is more akin to gambling than financial service.
With the rise in popularity of cryptocurrencies like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) during the pandemic, the number of DIY investors participating in cryptocurrency trading has increased significantly.
Her Majesty's Revenue and Customs (HMRC data) indicates that around 6 million UK residents own or have owned crypto assets.
Harriet Baldwin MP, chair of the committee, expressed concern about the dangers posed by the largely unregulated cryptocurrency industry.
โThe events of 2022 have shed light on the risks consumers face in the crypto-asset sector, a substantial part of which remains unregulated,โ he stated. "There is a pressing need for effective regulation to protect consumers and encourage valuable innovation in the UK financial services sector."
The committee also recommended that the government take a balanced approach to developing crypto-asset technologies and refrain from investing public resources in crypto-asset activities without a clear and beneficial use case.
Plans for a digital 'Britcoin', a central bank-backed digital pound issued by the Bank of England, remain on the table, despite the government's decision to abandon its plans to produce a non-fungible token through Royal Mint.
Regulations were sought in crypto in the US when the FTX crash that was the downfall of bitcoin mogul Sam Bankman-Fried came to light.
Bankman-Fried was extradited to the US from the Bahamas, where FTX was headquartered. He currently faces thirteen counts that include charges of securities fraud, wire fraud and campaign finance violations. The former FTX was accused of hiding bank accounts linked between the company and Alameda.
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