MPs say cryptocurrency has ‘no intrinsic value’ and calls for trading to be regulated as a form of gambling, rather than a financial service
- The Treasury Committee has published a new report on cryptocurrencies
- It has called on the government to regulate crypto trading as if it were gambling
- Treasury chairman Harriet Baldwin said crypto has “no intrinsic value.”
MPs are calling on the government to regulate trading in cryptocurrencies in the same way as gambling, amid concerns that this poses significant risks to consumers.
Since the high-profile collapse of Silicon Valley Bank earlier this year, which lost billions of dollars in total to millions of investors, there have been repeated calls for cryptocurrency regulation.
The government has already announced plans to regulate trading and lending in the market, bringing it closer to the world of traditional finance.
Sink or swim: Cryptocurrencies are increasingly coming under the scrutiny of policy makers
Currently, crypto companies only need to demonstrate that they can comply with anti-money laundering safeguards.
But today the Treasury Committee released a report on unsecured crypto-assets, finding that they pose risks to consumers given their price volatility and risk of losses.
The MPs expressed concern that regulating consumer crypto trading as a financial service would lead consumers to believe the activity is safe and protected.
Instead, the cross-party committee felt it was more like gambling than a financial service and should be regulated as such.
“Regardless of the regulatory regime, their price volatility and absence of intrinsic value means that unsecured crypto-assets will inevitably pose significant risks to consumers,” the report said.
In addition, consumer speculation in unsupported crypto assets is more like gambling than a financial service.
“We are concerned that regulating retail and investment activities in unsupported cryptoassets as a financial service will create a “halo” effect that leads consumers to believe that this activity is more secure than it is, or protected if it is not. .’
During the pandemic, DIY investors flocked to crypto trading after leading currencies like Bitcoin and Etherum soared to new highs. HMRC data shows that around 6 million Britons own or have owned crypto assets.
Commission Chair Harriet Baldwin MP said: ‘The events of 2022 have highlighted the risks to consumers posed by the crypto asset industry, large parts of which are still the wild west. Effective regulation is clearly needed to protect consumers from harm and support productive innovation in UK financial services.
“But with no intrinsic value, massive price volatility, and no discernible social good, consumer trading of cryptocurrencies like Bitcoin looks more like gambling than a financial service, and should be regulated as such. By betting on these unsecured “tokens”, consumers should be aware that all their money could be lost.”
The cross-party report also called on the government to take a balanced approach to the development of cryptoasset technologies.
It should try to avoid spending public funds supporting crypto asset operations without a clear, beneficial use case, as appears to have been the case with the Royal Mint NFT. It is not the task of the government to stimulate certain technological innovations in itself.’
The government last month dropped its plans to produce a non-fungible token for sale through the Royal Mint, just under a year after it was announced by then-chancellor Rishi Sunak.
Plans for a central bank-backed ‘Britcoin’ remain in place. The proposals would create a ‘digital pound’ issued by the Bank of England, accessible through digital wallets and exchangeable with cash and bank deposits.