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The UK Treasury Committee has called for the consumer trading of cryptocurrencies such as Bitcoin to be regulated as gambling.

A cross-party committee of British MPs has determined that cryptocurrencies such as Bitcoin “lack intrinsic value and fail to serve any meaningful social purpose”.

Moreover, the report points to negatives including the high energy consumption of cryptocurrencies and their potential exploitation by criminals in scams, fraud and money laundering.

Unbacked cryptoassets, commonly known as cryptocurrencies, constitute the most prominent form of digital currency.

The two most popular cryptoassets, Bitcoin and Ether, currently account for approximately two-thirds of the overall cryptocurrency market.

The committee believes these cryptocurrencies pose significant risks to consumers due to their price volatility and the potential for substantial losses.

MPs have therefore urged the government to classify the retail trading of crypto as gambling, as it would then be subject to what the group considers “appropriate” regulations.

One of the committee’s major concerns is the potential “halo” effect created by regulating crypto trading as a financial service, as previously proposed by the government.

The group fears that such regulation could mislead consumers into perceiving the activity as safe and protected, in contrast to its inherent risks.

HM Revenue & Customs data shows that approximately 10% of UK adults currently hold or have held cryptoassets, a figure which underscores the need for effective safeguards and regulations to protect individuals engaging in crypto trading, according to the committee.

“With no intrinsic value, huge price volatility, and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service.”
UK Treasury Committee chair Harriet Baldwin

The report does acknowledge the potential benefits of the underlying technologies of cryptoassets, particularly in cross-border transactions and less developed countries.

The report has also cautioned against the allocation of public resources to projects lacking clear and beneficial use cases, such as the now-abandoned Royal Mint NFT scheme.

The committee has advised the government to adopt a balanced approach to supporting the development of cryptoasset technologies and avoid promoting technological innovations “solely for the sake of innovation”.

Harriett Baldwin MP, chair of the Treasury Committee, said: “The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a wild west.

“Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry.

“However, with no intrinsic value, huge price volatility, and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service and should be regulated as such.

“By betting on these unbacked ‘tokens,’ consumers should be aware that all their money could be lost,” she added.

As the crypto industry continues to evolve rapidly, both inside and outside of gambling, it remains to be seen how the government will respond to these recommendations.

The full report can be accessed here.

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