Crypto trading isn’t gambling, UK government says

The UK Treasury Committee has recommended that the country’s crypto market should be classified as a form of gambling rather than a financial service. The committee’s report, published on May 17, argues that crypto investment activity aligns with the principle of “same risk, same regulatory outcome.”

The committee believes that such a classification would address concerns over potential addiction and the risk of consumers losing their money while betting on the volatile prices of digital assets like Bitcoin. Additionally, the report recommends the government to avoid allocating taxpayer funds to promote tech innovations, including digital tokens, without demonstrating clear public benefits.

While acknowledging the potential benefits of blockchain technology for the financial services industry, the committee’s focus is on mitigating risks associated with crypto trading and protecting consumers from excessive losses in the speculative crypto market.

As it happens, Britain’s financial services minister, Andrew Griffith firmly rejected the committee’s recommendation, asserting that the UK Treasury disagrees with such an approach and does not view crypto trading as a form of gambling.

Instead, Griffith said that the specific regulatory approach for the crypto sector will be in line with existing financial regulations rather than subjecting it to gambling-related oversight.

“The Treasury firmly disagrees with the Committee’s recommendation to regulate ‘retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service,’” he wrote.

By opting for a financial services approach, the UK government aims to ensure that the crypto sector operates within a regulatory framework that addresses risks, protects consumers, and a well-functioning financial market.  However, the matter continues to be a subject of ongoing deliberation as authorities explore the most appropriate and effective regulatory framework for the evolving crypto market.

In the United Kingdom, all forms of gambling are governed by the Gambling Act 2005. Various businesses, including bingo halls, lotteries, betting shops, online bookmakers, and casinos, are subject to regulation to address issues related to compulsive gambling and implement measures to combat money laundering.

Earlier in June, the Financial Conduct Authority (FCA) introduced new advertising rules for firms marketing crypto assets to consumers. Citing concern over investor protection, the City watchdog introduced a 24-hour “cooling-off” period specifically for first-time investors.

The new regulations also require firms promoting crypto products or services to include a clear risk warning in their promotions and ensure that adverts are transparent, fair, and devoid of misleading information.

Meanwhile, crypto firms must verify that individuals have the necessary knowledge and experience to invest in cryptocurrencies.