Bitcoin, the world’s largest cryptocurrency, has secretly surged in 2023.
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Cryptocurrency trading is akin to gambling and should be treated as such, UK lawmakers have said.
Unsecured tokens like Bitcoin And ether are not backed by underlying assets and have “no intrinsic value,” lawmakers on Britain’s Treasury Select Committee said in a report released on Tuesday.
With a combined market capitalization of $737.7 billion, bitcoin and ether alone account for two-thirds of all cryptocurrencies.
The events of the past year in the crypto industry — from the demise of crypto exchange FTX to the demise of experimental stablecoin Terra — have brought increased scrutiny from regulators concerned about negative consumer impacts.
In its Tuesday report, the Treasury Select Committee explained that increased volatility and the potential to lose large sums of money mean cryptocurrencies pose significant risks for consumers, the committee said.
“Given that retail trading in unsecured cryptocurrencies resembles gambling rather than a financial service, MPs are calling on the government to regulate it as such,” lawmakers said.
“The events of 2022 have highlighted the risks that the crypto-asset industry poses for consumers, as much of it remains a wild west,” Harriett Baldwin, chair of the Treasury Select Committee, said Tuesday . “Effective regulation is clearly needed to protect consumers from harm and support productive innovation in the UK financial services industry,” she added.
“However, because there is no intrinsic value, great price volatility, and no identifiable social good, consumer trading in cryptocurrencies like bitcoin resembles gambling rather than a financial service, and as such should be regulated. By betting on these non-hedged ‘tokens’ consumers should do so.” Be aware that all your money could be lost.
According to HM Revenue & Customs, around 10% of UK adults own or have owned cryptocurrencies.
The Finance Committee said it was concerned about government proposals to regulate consumer crypto trading as a financial service. Doing so, according to lawmakers, would create a “halo” effect, leading people to believe that crypto trading is safe and secure when it is not.
In February, the government laid out plans to regulate crypto assets and submitted its proposals for a consultation, the window of which ended on April 30.
Such a regulatory framework would potentially allow crypto firms to apply for bespoke licenses to operate in the UK – historically a major bone of contention for UK firms. The Financial Conduct Authority, which is the de facto regulator of crypto firms under the country’s money laundering regime, has set the bar high for crypto license approvals.
Blair Halliday, UK CEO of leading US crypto exchange Kraken said: “We fundamentally disagree with the Treasury Select Committee’s conclusion that cryptoassets have no intrinsic value. It is unfortunate that the Committee does not support the opportunity the UK has to be a true world leader in our rapidly evolving industry.”
“We firmly believe that the UK Government and the FCA are on the right track to developing appropriate regulations that support innovation while providing the necessary guard rails and consumer protections,” added Halliday. “Kraken will continue to work with lawmakers to help achieve these goals.”
In April, a senior UK government official told CNBC that he expects specific regulation of cryptocurrencies in the UK over the next 12 months.
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