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18-05-2023
LONDON: UK lawmakers on Wednesday, called for cryptocurrency investments in Britain to be regulated in a manner similar to the gambling industry. The plea was made by the influential cross-party Treasury Committee, just one day after EU ministers agreed on stricter tax regulations for cryptocurrency transactions. Concerns regarding the lack of oversight in the cryptocurrency sector have been mounting worldwide, particularly with regard to popular units like Bitcoin and ether.
According to a report by the Treasury Committee, “Unbacked crypto assets have no intrinsic value, and their price volatility exposes consumers to the potential for substantial gains or losses while serving no useful social purpose.” The committee further highlighted that the characteristics of crypto assets closely resemble gambling rather than a financial service, based on the evidence they have gathered on consumer behaviour. As a result, they strongly recommend that the government classifies retail trading and investment activities involving unbacked crypto assets as gambling, rather than as a financial service.
The global cryptocurrency market, which experienced a surge in demand from individual investors during the Covid lockdowns, reached its peak of approximately $3.0 trillion in late 2021. However, it subsequently suffered a significant decline and is currently valued at just over $1.1 trillion. The industry, aiming for acceptance from traditional finance, has been shaken by various scandals, including the collapse of cryptocurrency Terra in mid-2022 and the failure of exchange FTX later that same year.
The Treasury Committee expressed concerns about the risks posed by poorly managed businesses in the sector, as well as the increasing use of crypto by fraudsters and other criminals. The Conservative government, led by Prime Minister Rishi Sunak, is keen to establish a regulatory framework for crypto in order to avoid falling behind the EU and the United States. The committee report emphasized that the government’s role should not be to promote technological innovations for their own sake.
While the committee criticized Britain’s failed project to sell non-fungible tokens (NFTs) based on crypto technology, it praised the UK’s proposals for greater regulation of professional crypto investors. Additionally, the committee acknowledged the potential of cryptocurrencies to enhance efficiency and reduce transaction costs.
In a parallel development, the European Union has taken further measures to protect investors. EU finance ministers agreed on Tuesday to implement rules targeting individuals who keep their wealth in unregulated locations. Last month, the EU parliament approved the world’s first comprehensive rules for crypto assets. (Int’l Monitoring Desk)
