Government Rejects Call for Crypto to be Regulated as Gambling

Above: Financial Secretary to the Treasury Andrew Griffith, image: Gov.uk.

The UK government has rejected calls by UK lawmakers to regulate the retail trade of cryptocurrencies as gambling.

In response to a recent inquiry into the industry by a committee of parliamentarians, the Treasury said it "firmly disagrees" with the recommendation to regulate "retail trading and investment activity in unbacked crypto assets as gambling rather than as a financial service".

In May a committee of UK lawmakers released a report that recommended consumer trading in cryptocurrencies be regulated as gambling.

The Treasury Committee had judged that cryptocurrencies such as Bitcoin have no intrinsic value and serve no useful social purpose while consuming large amounts of energy and are used by criminals in scams, fraud and money laundering.

It proposed that retail clients should be considered to be gambling with crypto rather than engaging in a traditional financial service.

"Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry," said Harriett Baldwin MP, Chair of the Treasury Committee.

But the government said in a response that the Committee's suggestion that crypto trading be classed as gambling was out of kilter with regulations elsewhere.

Andrew Griffith, Financial Secretary to the Treasury, said such a move "would run completely counter to globally agreed recommendations from international organisations and standard-setting bodies."

He added that a system of gambling regulation could also fail to appropriately mitigate many of the critical risks that were discussed in HM Treasury’s recent consultation on crypto asset regulation, including those associated with market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.

"A financial services regulatory framework is more appropriate for addressing the risks of unbacked crypto assets and creating the conditions for safe innovation. This can – and will – come with a set of robust measures to mitigate consumer risks mentioned in the Committee’s report, including the risks of consumers getting misinformed," said Griffith.

The UK government says it is already taking concrete action on misinformation in the industry through the introduction of a dedicated financial promotions regulatory regime for crypto assets.

It says legislation was laid before Parliament and debated last month and will be in force by late 2023.