By 
The UK Treasury has firmly rejected proposals from an all-party parliamentary committee that sought to regulate consumer trading in unbacked cryptocurrencies like Bitcoin and Ethereum as gambling activities.
The committee raised concerns in May about the government’s plans to regulate consumer crypto trading as a financial service, fearing it could create a false sense of safety for consumers when dealing with highly volatile and unbacked cryptoassets.
Committee chair Harriett Baldwin emphasized the risks posed to consumers by the cryptoasset industry, stating that large portions of it still resembled a “wild west” with no intrinsic value and significant price volatility. She argued that consumer trading of cryptocurrencies resembled gambling more than a financial service and should be regulated accordingly, warning users that they could risk losing all their money by betting on unbacked tokens.
However, the UK Treasury responded by firmly disagreeing with the committee’s recommendations, citing potential misalignment with international standards and the risk of creating unclear and overlapping regulatory mandates between financial regulators and the Gambling Commission.
The Treasury asserted that a gambling regulatory approach would contradict globally agreed-upon recommendations from organizations like the International Organization of Securities Commissions and the G20 Financial Stability Board. These recommendations advocate for a “same activity, same risk, same regulatory outcome” principle, which means cryptoasset activities with similar functions and risks to traditional financial systems should be subject to regulations that ensure equivalent outcomes.
The Treasury argued that a financial services regulatory framework would be more appropriate for addressing the risks associated with unbacked cryptoassets and fostering safe innovation. This approach could include robust measures to mitigate consumer risks, as mentioned in the committee’s report, such as the risk of consumers getting misinformed.
Furthermore, the Treasury noted that a gambling regulatory system might not effectively address critical risks highlighted in a recent government consultation on cryptoasset regulation, including market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.
Instead, the Treasury believes that a financial services regulatory framework is better suited to address these risks and create an environment for safe innovation while safeguarding consumers.
Comments