Britain’s financial services minister Andrew Griffith has firmly rejected the proposal to regulate cryptoassets under the same framework as gambling.
The suggestion to classify cryptocurrencies as gambling, as recommended by the UK Treasury Committee in May, has been met with strong opposition from Griffith.
One of Griffith’s main concerns is the potential discord this move could create between the UK and international regulatory bodies, including those in the European Union.
He also argued that such categorisation would not effectively address the risks associated with the crypto sector.
In his reply, Griffith stated that he “firmly disagrees” with the Committee’s recommendation to regulate “retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service”.
He emphasised that globally agreed-upon recommendations from organisations such as the International Organisation of Securities Commissions (IOSCO) and the G20 Financial Stability Board (FSB) support the current financial regulatory approach.
Griffith explained that these recommendations follow the principle of “same activity, same risk, same regulatory outcome”.
In other words, any cryptoasset activity with similar functions and risks to traditional financial systems should be subject to regulations ensuring equivalent outcomes.
He warned that the proposed approach could lead to confusion and overlapping mandates between financial regulators and the Gambling Commission.
The UK government further clarified that the Gambling Commission is well-equipped to safeguard consumers in the context of gambling activities but lacks expertise in overseeing financial risks akin to those present in financial markets.
As the cryptoasset industry is highly globalised and borderless, the UK’s unilateral adoption of a different regulatory system could “push cryptoasset activity offshore”, exposing consumers to residual risks.
Instead of classifying cryptoassets as gambling, the UK government believes that a financial services regulatory framework is more appropriate for addressing the risks associated with unbacked cryptocurrencies while fostering safe innovation.
Measures are being taken to mitigate consumer risks, including the risks of misinformation.
To this end, the government has introduced a dedicated financial promotions regulatory regime for cryptoassets, with legislation set to come into force by late 2023.