In a fresh wave of regulatory scrutiny, UK parliament’s Treasury committee has proposed that cryptocurrency trading should be treated as gambling rather than a financial service. This call comes after an extensive inquiry into the rapidly evolving cryptocurrency industry, and challenges the traditional perception of such digital assets.
The committee expressed concerns that consumers trading in volatile and unbacked assets such as bitcoin could face significant financial loss. The MPs concluded that, much like gambling, cryptocurrency trading and investing can be addictive.
“Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry,” Harriett Baldwin, the Conservative MP and Treasury committee chair, said. “By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”
The Call for a Balanced Approach
The committee recommended that the government take a more measured approach when promoting technological innovations such as digital tokens. They called for clear demonstrations of public benefit before endorsing and investing taxpayer money into such ventures.
This follows the recent failure of a non-fungible token (NFT) project by the Royal Mint, which was criticised as a “crypto gimmick” and scrapped within a year of its announcement.
The report said, “It is not the government’s role to promote particular technological innovations for their own sake.”
Avoiding a Halo Effect
There has been growing speculation that cryptocurrency trading would fall under the Financial Conduct Authority (FCA) – the body responsible for ensuring firms comply with money-laundering rules and overseeing advertising practices.
However, the committee warned that regulating cryptocurrency trading via the FCA could create a false sense of security for consumers, leading them to believe the industry was safer than it is, or that they were safeguarded from financial losses.
Crypto Trading as Gambling: Implications for the iGaming Industry
- Potential for Increased Regulatory Scrutiny: If the government accepts the recommendation to regulate cryptocurrency trading as gambling, the iGaming industry may face heightened regulatory scrutiny due to the increased crossover between the two sectors.
- Demand for Greater Transparency: This move could prompt a need for greater transparency in NFT and crypto transactions within the iGaming industry, as well as clear communication to consumers about the potential risks.
- Shift in Consumer Perceptions: Classifying cryptocurrency trading as gambling could fundamentally alter the perception of the practice among consumers. This may impact their decision to engage with iGaming platforms that offer cryptocurrency transactions.