United Kingdom lawmakers have recommended regulating crypto investments in the UK similarly to the gambling industry.
This recommendation comes after EU ministers agreed on stricter tax rules for crypto transactions. Concerns about the lack of oversight in the cryptocurrency sector have been growing globally, especially for popular units like Bitcoin and Ether.
The Treasury Committee, a powerful cross-party group in parliament, stated in a report that unbacked cryptoassets have no inherent value and their price volatility exposes consumers to significant gains or losses without serving any useful social purpose. The committee further highlighted the resemblance of these characteristics to gambling rather than a financial service, based on evidence of consumer behaviour they have gathered. As a result, they strongly advised the government to regulate retail trading and investment in unbacked crypto assets as gambling rather than a financial service.
The global cryptocurrency market, fueled by high demand from individual investors during the Covid lockdowns, reached its peak value of around $3.0 trillion in late 2021 but has since sharply declined and currently stands at just over $1.1 trillion. The industry, seeking acceptance from traditional finance, has been rattled by a series of scandals, including the collapse of cryptocurrency Terra in mid-2022 and the failure of exchange FTX later that year.
The Treasury Committee expressed concerns about the risks posed by poorly managed businesses in the sector and the increasing use of crypto by fraudsters and other criminals. The UK government, led by Prime Minister Rishi Sunak, aims to establish a regulatory framework for cryptocurrency to avoid lagging behind the EU and the United States. The committee’s report emphasized that the government’s role should not be to promote technological innovations for the sake of innovation alone.
While the committee criticized the UK’s unsuccessful project to sell non-fungible tokens (NFTs) based on crypto technology, it commended the country’s proposals for tighter regulation of professional crypto investors. Additionally, the committee acknowledged the potential of cryptocurrencies to improve efficiency and reduce transaction costs.
In parallel, the European Union has taken further steps to protect investors. EU finance ministers agreed on rules to target individuals who keep their wealth in unregulated locations. Last month, the EU parliament approved comprehensive rules covering crypto assets, a global first.