UK Government Rejects Treating Unsupported Crypto Trading As Gambling

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The UK government has taken a strong stance against categorizing consumer trading in unsecured crypto-assets as gambling. This comes in response to a recent Treasury Committee report, which suggested regulating crypto trading as gambling rather than a financial service.

The Committee’s report, released in May, said cryptocurrencies such as Bitcoin have no intrinsic value and serve no useful social purpose, while consuming vast amounts of energy and being used by criminals in scams, fraud and money laundering.

Andrew Griffith MP

But in a written response to the Committee’s concerns, Andrew Griffith, Economic Secretary to the Treasury, said such regulation would run counter to global standards and could drive crypto asset activity overseas.

His letter said: “The approach proposed by the committees would therefore risk creating misalignment with international standards and approaches of other major jurisdictions, including the EU, and potentially creating unclear and overlapping mandates between financial regulators and the Gambling Commission.

“A system of gambling regulations may also fail to adequately mitigate many of the critical risks that were discussed during the UK Treasury’s recent consultation on crypto-asset regulation, including those associated with market manipulation, inadequate prudential arrangements and gaps in key financial risk management practices.”

A different approach

The government argues that a gambling regulatory framework may not effectively address the critical risks associated with crypto-assets, such as market manipulation and inadequate prudential provisions.

Instead, HM Treasury advocates a financial services regulatory framework to mitigate the risks of unbacked crypto-assets and promote safe innovation.

Measures are already in place, including the introduction of the UK’s anti-money laundering and anti-terrorist financing regime and dedicated legislation for financial promotions for crypto-assets.

“Trust is necessary”

The UK Treasury Committee’s recommendation to regulate consumer trading in unsupported crypto as gambling had also sparked a major backlash from industry experts.

Commenting on the government’s rejection, Olivier Fines, EMEA Advocacy Manager at the CFA Institute on Crypto Industry Regulation, said: A strong regulatory framework must be established for the benefit of crypto providers and users.

“Policymakers must either agree on the application of existing laws to various components of the crypto ecosystem or craft new laws to fill the gaps. Trust in the integrity of crypto markets is essential to attracting investors and building large-scale crypto networks.

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