The UK panel strongly advises treating unbacked cryptocurrencies like gambling considering their high volatility.
Since unbacked cryptocurrencies like Bitcoin (BTC) are incredibly volatile and have no fundamental value, a UK regulatory body recently proposed that retail investing in them should be treated similarly to gambling.
The Treasury Select Committee, a cross-party committee of members of parliament, “strongly recommended” this treatment for the trade of digital assets in a report released on Wednesday, May 17.
The recommendation follows an extensive investigation of the proper management of crypto assets. However, regulating crypto trading in a manner similar to gambling might represent a departure from how other jurisdictions approach this asset class. The report mentioned:
“We are worried that regulating retail trading and investment activity in unbacked crypto assets as a financial service will have the unintended consequence of giving consumers the impression that this activity is safer than it actually is or that they are protected when they are not.”
Almost 10% of UK adults currently own cryptocurrency. The UK government will have two months from the date of publication, per convention, to respond to the report.
A Comparison of Cryptocurrency to Gambling
The UK panel’s view that digital assets have “no intrinsic value, huge price volatility, and no discernible social good” is reflected in the comparison of Bitcoin investing to sports betting. As a result, they are essentially distinct from traditional financial assets.
Additionally, it will include cryptocurrency in the high tax bracket that applies to gambling. However, cryptocurrency users will also need to confirm the names of their customers and take precautions against money laundering, just like the gambling business.
The UK is not the first nation to implement such policies. Previously, nations like Singapore have restricted retail cryptocurrency trading. According to Singaporean regulations, most consumers shouldn’t invest in crypto assets due to their volatility.
The EU has passed the Markets in Crypto Assets (MiCA) laws, while the UK increases its hold over the cryptocurrency industry. Over the course of the following year, the EU will incorporate the MiCA regulation into national laws. When it comes to cryptocurrency regulation, the EU has been rather innovative. On the other hand, the US has lagged behind when it comes to creating clear laws in the cryptocurrency industry.