UK urged to treat cryptocurrencies as gambling rather than financial assets

The UK Treasury Committee published report urging the government to regulate cryptocurrencies as gambling instruments rather than financial assets.

In the department’s view, retail trading of digital assets is more akin to sports betting than to investment. Even the major cryptocurrencies, such as Bitcoin and Ethereum, “have no intrinsic value and do not serve any socially useful purpose”.

In February, the Treasury Committee already issued recommendations for the UK authorities urging “tough regulation”.

“The committee is also concerned that regulating consumer trading of digital assets as a financial service — as proposed by the government — would create a ‘halo effect’, causing consumers to believe that this activity is safe and protected when it is not,” the report states.

The department notes that the volatility of cryptocurrencies poses a serious risk to retail investors. However, officials acknowledge the benefits of blockchain technology for the economy itself.

CryptoUK, the trade association representing the crypto industry, strongly disagrees with the Treasury’s characterization.

“We are both concerned and disappointed by these assertions, which are useless, false, fundamentally wrong and unfounded,” the organisation said.

Earlier in February, the UK Treasury published a document outlining plans to oversee cryptocurrency exchanges and lending platforms to ensure they adhere to “fair and reliable standards”.

Earlier, Deputy Governor of the Bank of England John Cunliffe proposed regulating digital assets by analogy with traditional finance. He also noted that decentralized protocols do not yet provide an effective mechanism for risk management.