MPs call for crypto trading to be treated as gambling

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Cryptocurrency trading should be regulated as a form of gambling, the Treasury Committee has said in a new report arguing that cryptocurrencies have no intrinsic value and serve no useful social purpose.

The report states that around 10% of UK adults hold or have held crypto assets, which the Committee believes poses a significant risk to consumers due to their volatility.

The events of 2022 have highlighted the risks posed to consumers by the crypto asset industry, much of which remains a Wild West, said Treasury Committee Chairwoman Harriett Baldwin MP.

Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK financial services industry.

What are the MPs asking for?

The committee called on the government to treat cryptocurrency trading as gambling due to its high-risk nature.

He said that while he supported financial innovation that had potential benefits, these remained unclear when it came to cryptocurrency, when the risks posed to consumers, as well as the environment, were already. real and present.

But he expressed concern that regulating retail trading of unsecured crypto assets could create a halo effect that would give consumers a false sense of security.

The report also recommended the government avoid spending public resources to support crypto, citing the now discontinued Royal Mint NFT.

Should Cryptocurrency Trading Be Treated Like Gambling?

MPs may well be right, says Laith Khalaf, head of investment analysis at AJ Bell.

Crypto-assets are extremely speculative and could easily be worth nothing, leaving investors with zero to show for the money they’ve piled up, Khalaf says. Everyone probably knows someone who either made a bundle or lost a bundle while trading crypto.

It should also be noted that around five million people bought crypto assets just ahead of the six million people investing in stocks and ISA shares. The bottom line must be that many people are skipping proven financial products and diving straight into the deep end with crypto, Khalaf says.

The cryptocurrency has become particularly popular with young people who are regularly targeted with advertisements on social media. Those who have small sums to invest might be tempted to multiply them tenfold by investing in cryptocurrency, but that’s a gamble, because they could lose their investment.

The reason for buying crypto is usually because everyone else is doing it, and so the price goes up, much like how a pyramid scheme works, Khalaf says. Those who come in and out early pose as bandits, while those who buy at the height of the frenzy crash and burn.

That said, cryptocurrency has become a gateway investment for many, says Myron Jobson, senior personal finance analyst at Interactive Investor. Blockchain has the potential to become a useful technology, and telling a large swath of the population that they are gamers might not steer them away from crypto.

Ultimately, we need to see better financial literacy in the UK, and we also need to see the financial services sector make a better case for investing, says Jobson.

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