UK Lawmakers Call for Regulation of Retail Crypto Trading as Gambling

Jimmy Aki
Last Updated:

Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.

The Treasury Committee has advocated for consumer cryptocurrency trading in the UK to be regulated as gambling. According to the legislators, consumers should be cautious due to the volatility and alleged lack of inherent value of most crypto assets.

Lawmakers Want Stronger Regulation for Crypto Trading

In a May 17 House of Commons Committee report, the UK Treasury vehemently advocated classifying retail cryptocurrency trading and investing activities as gambling.

The report release is a follow-up on His Majesty’s Treasury’s February update, which described the government’s plans to “robustly regulate crypto asset activities.”

However, this recent report, titled “Regulating Crypto,” addresses the growing concerns surrounding the risks associated with the volatile and speculative nature of the cryptocurrency market.

The Treasury Committee’s report highlights the significant risks posed to consumers who engage in retail crypto trading.

According to the committee, crypto assets such as Bitcoin and Ethereum are characterized by extreme price volatility, a lack of investor protection, and limited regulatory oversight.

Retail investors, often enticed by the promise of quick profits, are particularly vulnerable to the potential pitfalls of this unregulated market.

By likening crypto trading to gambling, the committee aims to protect consumers and ensure the financial system’s stability.

Harriett Baldwin, chair of the Treasury Committee, stated that “the events of 2022 have highlighted the risks posed to consumers by the crypto asset industry, large portions of which remain a wild west.”

Therefore, effective regulation is unquestionably required to safeguard consumers from damage and promote beneficial innovation in the UK’s financial services sector.

She noted that consumer trading in cryptocurrencies like Bitcoin more closely resembles gambling than a financial activity and should be treated as such due to their lack of intrinsic value, extreme price volatility, and apparent lack of social good.

More recently, advocates for conventional financial institutions, such as the International Regulatory Strategy Group (IRSG), expressed concern that the UK’s intentions to regulate cryptocurrency would legitimize a risky sector.

A Window of Hope for UK Crypto Enthusiasts

While the report’s recommendation is a step towards addressing the risks associated with retail crypto trading, it also raises concerns among industry stakeholders.

According to last year’s research by His Majesty’s Revenue and Customs (HMRC), 10% of British people have or have had cryptocurrency, with more than 55% having never sold any.

In light of this, CryptoUK, the self-regulatory trade association for the UK crypto-asset industry, has disagreed vehemently with the report’s portrayal of cryptocurrency as gambling.

Ian Taylor, Board Advisor at CryptoUK, stated that they are concerned and disappointed by these claims.

He noted that the statement does not accurately capture the cryptocurrency industry’s true essence, goal, and potential.

Critics argue that regulating crypto as gambling could stifle innovation and deter legitimate businesses from operating in the UK.

Striking a balance between investor protection and fostering innovation will be crucial to maintaining a thriving crypto industry.

The Treasury committee acknowledges that while cryptocurrency itself may not benefit the financial services industry, the underlying blockchain technology, such as lowering international payment fees and enhancing financial access, may.

Therefore, a strong regulatory framework should be in place to promote these advances in the UK while reducing some of the risks related to crypto assets.

The committee’s report recommending that retail crypto trading be regulated as gambling is a significant step forward in addressing the risks associated with this emerging market.

By highlighting the similarities between crypto trading and gambling, the report underscores the need for consumer protection measures and a robust regulatory framework.

However, implementing such regulations must strike a balance between protecting investors and nurturing innovation.

As the crypto landscape continues to evolve, international collaboration will be essential to establishing consistent and effective regulations across borders.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.