Should Crypto Currencies be Regulated as Gambling?

The UK Treasury Committee report has said consumer crypto trading should be regulated as gambling rather than financial services. The Committee strongly recommended that the Government regulates retail trading and investment activity in unbacked crypto assets as gambling rather than as a financial service. 

Harriet Baldwin MP chair of the treasury committee stated ‘cryptos more closely resembles gambling rather than financial service and should be regulated as such.’

Charles Randall, former chairman on the Financial Conduct Authority (FCA) told the treasury committee ‘speculative crypto is gambling pure and simple.’

The report produced by the treasury committee argues that cryptocurrencies are subject to huge price volatility, adding that they have no intrinsic value and no discernible social good. Written evidence submitted by the FCA in the call for evidence stated ‘crypto gambling addictions are rising and there a limited controls in place to protect vulnerable consumers’[1].

The treasury committee pointed to HM Revenue and Customers figures from 2021 stating around 10% of UK adults hold or have held crypto assets.[2]

The FCA also stated ‘crypto gambling addictions are rising and there is limited control in place to protect vulnerable consumers.’[3]

This report comes weeks after the Government published its gambling white paper. Whilst crypto currencies are mentioned within the white paper, they are only referred to within the very limited scope of payments and customer deposits. The white paper states the Gambling Commission’s approach to crypto currencies within the gambling licensed remit adequately deals with the risks at present, but it will continue to monitor the development of new technologies and payment vehicles. It therefore seems unlikely significant change to be made in this area in the near future.

Many crypto currency leaders and commenters claim the proposal by the committee to be misguided and the proposal wholly unsuitable. As UK consumers and users of crypto would not be afforded the same protections and safeguards as bespoke financial service regulations would offer under a gambling regime.

However, If the recommendation by the committee is accepted, it would make crypto trading subject to the gambling laws within Great Britain, which include many regulatory and anti-money laundering safeguards.

The UK government is currently working on a comprehensive crypto regulatory framework. Which should provide more detailed information on the government’s proposed plans for crypto currency regulation.

[1] Financial Conduct Authority (CAI0070)

[2] https://www.gov.uk/government/publications/individuals-holding-cryptoassets-uptake-and-understanding

[3] Financial Conduct Authority (CAI0070)