The UK Treasury Committee has called for consumer trading in unbacked crypto such as bitcoin and ether to be regulated as gambling.
The influential cross-party Committee of MPs declared that cryptocurrencies such as bitcoin have no intrinsic value and serve no useful social purpose, while consuming large amounts of energy and being used by criminals in scams, fraud and money laundering.
The Committee's conclusions are at odds with Prime Minister Rishi Sunak's ambitions to make the UK into a global hub for cryptoasset technology. It also calls into question Government plans to regulate consumer crypto trading as a financial service, arguing that this will create a ‘halo’ effect, leading consumers to believe this activity is safe and protected, when it is not.
In its conclusion, the Committee drew clear and critical parallel's between Sunak's previous enthusiasm for NFTs - since abandoned - and his public backing of cryptoassets.
"Given the future benefits of crypto remain unclear, the Government should take a balanced approach to supporting the development of cryptoasset technologies and avoid spending public resources on projects without a clear, beneficial use, as appears to have been the case with its now-abandoned Royal Mint non-fungible token (NFT)," the report concludes. "It is not the Government’s role to promote particular technological innovations for their own sake."
Harriett Baldwin MP, chair of the Treasury Committee, says the events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, "large parts of which remain a wild west".
"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," she says. "By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost."
The Committee's conclusion have been strongly rejected by industry association CryptoUK.
Ian Taylor, board advisor at CryptoUK, comments: “We are both concerned and disappointed by these claims which are unhelpful, false, fundamentally flawed and unsubstantiated. The statement fails to reflect the true nature, purpose and potential of the crypto industry.
“We acknowledge that consumer risk exists, and this should be mitigated through education, awareness and a more robust regulatory framework. But equating cryptocurrency with gambling is both unhelpful and untrue.”