The crackdown on cryptocurrency escalated today after lawmakers called for consumer trading to be regulated like gambling.
In a new report by a cross-party committee, British politicians claimed the likes of Bitcoin and Ether have “no intrinsic value” and serve “no useful social purpose.”
They also noted several adverse impacts of cryptocurrencies. Specifically, they highlighted the vast energy consumption, the risk to consumer traders, and the criminal use in scams, fraud, and money laundering.
‘Effective regulation is clearly needed.
Due to the public risks, the committee warned against regulating trading as a financial service — which the UK government has proposed.
“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 Committee chair Harriett Baldwin.
“However, 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. By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”
Unsurprisingly, the comments have sparked an uproar in the crypto community. CryptoUK, an industry lobby group, was particularly affronted by the comparison with gambling.
“Professional investment managers see Bitcoin and other cryptoassets as a new alternative investment class — not as a form of gambling — and institutional adoption of unbacked crypto assets has increased significantly,” said Ian Taylor, board advisor at CryptoUK.
“Furthermore, gambling is exempt from capital gains tax. Does the government really wish to exclude tens of millions of pounds in tax income from gains made by the buying and selling of unbacked crypto assets?”
‘Crypto has been crucial for the unbanked.
Taylor further criticised the lawmakers for overlooking evidence submitted by CryptoUK. He argued they had neglected the sector’s moves to track, monitor and report, as well as efforts to mitigate fraud with analytics, and commitments to work closely with regulators and law enforcement.
In addition, he disputed claims that cryptocurrencies lacked useful social purposes.
“Crypto has been crucial in serving the unbanked as a force for good, making secure and efficient peer-to-peer payments available to the most vulnerable in our society,” he said. “Also, the report bears no mention of tokenization of financial products, which we specifically highlighted in the evidence session as a key benefit of the technology.
“The ability to represent financial products such as bonds and equities on a blockchain defers a host of benefits. These include faster settlement times, reducing intermediaries thus saving costs, new access to markets, increased liquidity, and automation through smart contract technology.”
His arguments, however, arrive at a tough time for the industry. Trust in cryptocurrencies has been battered by market turmoil, the FTX scandal, and the collapse of “stablecoin” terra. In response, governments around the world are pushing for further regulation of the sector.
As is so often the case with tech legislation, the EU is leading the charge. In April, the European Parliament approved the world’s first comprehensive set of rules for crypto-assets.
In the UK, meanwhile, the election of a pro-crypto Prime Minister has sparked hopes that the country will become a global hub for the sector. But the new committee report shows any such objectives face powerful opposition.