The rejection came in response to the House of Commons Treasury Committee’s report on the regulation of cryptoassets trading. “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,” the committee concluded. “These characteristics more closely resemble gambling than a financial service, an impression reinforced by the evidence we have received of consumer behaviour.”
The treasury recognises many of the consumer risks described in the report, as well as the urgent need for regulation. However, it “firmly disagrees” with the committee’s conclusion. The government believes a financial services regulatory framework would be a more appropriate approach for addressing the risks of crypto trading.
To treat retail crypto trading this way would not be in line with the recommendations of international organisations such as the International Organisation of Securities Commissions and the G20 Financial Stability Board. A financial services approach to crypto regulation would ensure steps to mitigate the risk to consumers.
A gambling regulatory framework would fail to reduce the risks of cryptocurrency trading. A financial services approach would better address issues such as market manipulation, inadequate loaning practices, and failures in financial risk management.
The Gambling Commission has a strong track record of safeguarding consumers and the wider public by ensuring gambling is safe and fair. However, overseeing financial risks, which are akin to those which exist within financial markets, is not within the mandate or field of expertise of the Gambling Commission.
The government has recently proposed legislation for a dedicated financial promotions regulatory regime. The aim is to make the UK a leading jurisdiction for cryptoasset technology and investment, underpinned by clear and robust regulation.
The question of whether emerging products such as cryptocurrency and NFTs should be considered gambling has been debated by regulators for years. In May 2022, Gambling Commission CEO Andrew Rhodes said it was difficult for a regulator to take action. These products often contain gambling characteristics, but not enough to be considered purely gambling. The UK government committee is not the first political body to call for crypto trading to be considered gambling. In January 2023, European Central Bank board member Fabio Panetta made a similar plea.
