UK Rejects Call to Regulate Cryptocurrency Trading as Gambling
UK government through the Economic Secretary to the treasury rejected a parliamentary committee’s recommendation to regulate cryptocurrency trading as a form of gambling.
The similarities between crypto/bitcoin/NFTs trading with other forms of gambling has been tabled at conferences, through written articles etc. and the issue of regulating it as gambling, has been a topic of discussion by a lot of jurisdictions for a while now but not much has been said or done by regulators in that regard.
Recently a parliamentary committee recommended that the UK government regulate cryptoassets trading as gambling.
The UK parliamentary committee in their recommendation said that “Unbacked cryptoassets have no intrinsic value, and their price volatility exposes consumers to the potential for substantial gains or losses, while serving no useful social purpose,” and that these characteristics more closely resemble gambling than a financial service.
The committee concluded that this notion was reinforced by the evidence received of consumer behavior.
However, the UK Economic Secretary to the treasury, Andrew Griffith, rejected the call to regulate.
Reasons for Rejection
Griffith explained that in as much as the treasury recognizes many of the consumer risks described in the report, as well as the urgent need for regulation, it “firmly disagrees” with the committee’s recommendation for these reasons:
- It might create misalignment with the recommended standards of international organizations like Securities Commission and G20 Financial Stability Board standards.
- It risked obscuring the boundaries between the roles of financial and gambling regulators.
- It would not address the unique risk of crypto currency trading as financial services will have better regulatory approach that will ensure steps to reduce the risks to consumers.
- There is a lack of expertise within the Gambling Commission to address and mitigate the risks associated with cryptocurrency trading, such as market manipulation, inadequate loaning practice and financial risk management.
The UK government believes a financial services regulatory framework would be a more appropriate approach for addressing the risks of crypto trading.
In January 2023, European Central Board member Fabio Panetta also made a call for the regulation of unbacked cryptocurrency trading as gambling under gambling laws so as to protect vulnerable consumers.