MPs Recommend Treating Crypto Trading as Gambling, Citing Lack of Intrinsic Value and Risks

In a recent development, a prominent panel of Members of Parliament (MPs) has advocated for the regulation of consumer crypto trading and speculation, classifying it as a form of gambling. The Treasury Committee, representing a cross-party group of MPs, contends that digital currencies such as Bitcoin and Ether possess “no intrinsic value and no useful social purpose.” They further highlight the considerable energy consumption associated with these currencies, as well as their misuse by criminals for fraudulent activities.

This recommendation follows the government’s proposal in February to regulate the crypto industry under financial services law. However, the MPs argue that an alternative approach should be adopted, recognizing that speculation in unsupported cryptoassets, particularly Bitcoin, bears greater resemblance to gambling than a financial service. They propose that existing safeguarding rules governing lotteries, betting firms, and casinos should be extended to apply to crypto trading.

According to HM Revenue and Customs, a recent report highlights the “significant risk” associated with digital currencies due to their substantial price volatility, which exposes investors to the possibility of losing their entire investment. Moreover, the report raises concerns about the rising prevalence of crypto addiction and the insufficient protective measures in place for vulnerable consumers.

The MPs express apprehension that subjecting the industry to financial service regulation may foster a false sense of security among consumers. It is leading them to believe that their participation is safer and better protected than it actually is. Consequently, the report strongly recommends that the government regulate retail trading and investment in unsupported crypto trading as gambling. In alignment with the principle of “same risk, same regulatory outcome.”

This latest development comes in the wake of a 2018 report by the same committee. It characterized the cryptocurrency industry as a “Wild West.” The MPs maintain that subsequent inquiries have failed to warrant a revision of this description. Committee chair Harriett Baldwin, a Conservative MP, stresses the necessity of effective regulation to protect consumers. Also, support innovative developments in the UK’s financial services industry. She argues that due to the absence of intrinsic value, substantial price volatility. Also, a lack of discernible social benefits, and consumer trading of cryptocurrencies like Bitcoin. It should be regulated as gambling rather than as a financial service.

Nevertheless, the MPs affirm their belief in the potential of the underlying technology. It is acknowledging its potential to enhance efficiency and reduce the costs of payments. They encourage the government to adopt a balanced approach that supports innovation while ensuring appropriate regulation. Additionally, the committee reveals that it is separately exploring the potential role of central bank-backed digital currencies.

The report also criticizes the government’s unsuccessful attempt in April 2022 to launch a non-fungible token (NFT) through the Royal Mint, emphasizing the importance of avoiding the allocation of public resources to cryptoasset activities without clear and beneficial use cases.

In response to the committee’s recommendations, a Treasury spokesperson indicated. The government is likely to reject the proposal. Citing the effectiveness of financial services regulation in mitigating risks posed by crypto assets. The spokesperson emphasized the government’s commitment to agile regulation that robustly addresses pressing risks while promoting innovation within the market.

As governments worldwide face increasing pressure to regulate the crypto industry, recent events. The bankruptcy of the crypto platform FTX has intensified the urgency. The European Union has already approved stricter rules for crypto assets. Granting new powers to ban exchanges that fail to protect consumers. Additionally, the International Organisation of Securities Commissions (IOSCO). Which includes regulators from the US and UK. They set to announce proposals for the first global set of rules governing crypto trading…

What are your thoughts on these MPs’ radical opinions on crypto?