MPs call on UK ministers to regulate crypto like gambling

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A powerful group of cross-party MPs have called on the UK government to abandon plans to regulate crypto as a financial service and treat it like gambling.

The Treasury select committee said in a report that the Financial Conduct Authority’s proposals to regulate the crypto industry could create a halo effect that makes crypto look safer than it is and could tempt people to invest money in a speculative market that they should avoid.

The events of 2022 have highlighted the risks posed to consumers by the crypto-asset industry, said Harriett Baldwin, the committee chair, referring to when UK-based crypto holders lost hundreds millions due to fraud, scandals such as FTX and wild swings in cryptocurrency values.

With no intrinsic value, enormous price volatility, and no discernible social good, the consumer trade of cryptocurrencies like bitcoin is more like gambling than a financial service, and should be regulated in as such, she added.

A person familiar with the TSC’s position said it was taking a very different approach to the government, which has just completed a consultation on FCA proposals to regulate crypto in the same way it oversees crypto. issuance and trading of stocks and bonds.

The Gaming Commission, which has about 300 employees, did not immediately respond to a request for comment on its willingness or ability to regulate the cryptocurrency industry.

The risks posed by crypto are typical of those that exist in traditional financial services and its regulation of financial services rather than regulation of gambling has been proven to mitigate them, the Treasury said.

Crypto offers opportunities, but we are taking an agile approach to vigorously regulating the market, addressing the most pressing risks first in a way that fosters innovation, they added.

The TSCs are keen to avoid creating the perception that crypto is a legitimate investment, according to a person familiar with the matter, and the report did not focus on detailing the protections under the two regimes,

Sam Richardson, deputy money editor of consumer advocacy group Which?, said it was right for MPs to highlight the risk that investors could be exposed to unscrupulous companies or individuals, but he declined to comment on whether falling under the gambling regime would offer more or less protection. to consumers.

Gaming companies are required to treat customers fairly, while the FCA has a much more detailed set of rules on the trading and issuance of securities and will soon impose a new consumer duty requiring businesses to deliver fair results.

The FCA said it welcomed the contribution of the Treasury Select Committees to the ongoing discussion on the regulation of crypto-assets in the UK, adding that it was working closely with the government and looked forward to the result of its consultation and subsequent new legislation.

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The TSC report on crypto regulation also criticized the government for asking the Royal Mint to create a non-fungible token (NFT) as part of the Chancellor of the Exchequer’s ambition to make the UK a global hub for technology and investment in crypto-assets.

He [the government] should seek to avoid spending public resources to support crypto-asset activities without a clear and beneficial use case, as appears to have been the case with the Royal Mint NFT, the TSC said.

The FCA already exercises limited oversight of cryptocurrency businesses and acts as an anti-money laundering supervisor for registered entities. It will soon be able to control advertisements from UK and overseas based crypto companies.

The UK government’s approach to crypto regulation is largely in line with markets such as the EU and US, where financial and securities regulators take on more responsibility.

City groups had previously warned the UK against its proposals to regulate crypto, warning that the plans could offer legitimacy to a dangerous market.

The FCA warned in 2021 that consumers should be prepared to lose all their money if they invest in crypto products.

Later that year, the FCA declared that Binance, by far the largest crypto exchange in the world, could not be regulated after failing to meet basic queries. The company has since said it intends to be regulated in the UK.

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