Regulate Cryptocurrencies Like Regulating Gambling, UK Treasury Committee says

The U.K. Treasury Committee believes the government should regulate cryptocurrencies like it does gambling, due to the huge risks that cryptocurrencies such as Bitcoin pose to consumers.

The committee said in a report that unbacked crypto assets have no intrinsic value, and their price fluctuations allow consumers to potentially make or lose money while not serving any useful social purpose. So investing in cryptocurrencies is more like gambling than a financial service.

It also concerned that regulating unbacked cryptocurrencies as retail tradings and investments could have a "halo" effect, leading consumers to believe that investing in cryptocurrencies is safer than it actually is, or that they are protected when they are not.

"We therefore strongly recommend that the Government regulates retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service, consistent with its stated principle of 'same risk, same regulatory outcome,'" the committee said.

Crypto association CryptoUK, however, strongly disagreed with this opinion.

"We are both concerned and disappointed by these claims which are unhelpful, false, fundamentally flawed and unsubstantiated. The statement fails to reflect the true nature, purpose and potential of the crypto industry," CryptoUK said in a statement.

While the total market capitalisation of crypto assets represents a tiny fraction of the financial system, the collapse of crypto firm FTX last year has raised the urgency for regulation of the industry.

Harriett Baldwin, a British MP, believes a large part of the crypto industry is still a "Wild West".

According to official figures, 10% of British adults hold or have held crypto assets.

The U.K. wants to become a global hub for cryptocurrency and blockchain technology, and is planning to develop the country's first cryptocurrency regulatory rules.

Meanwhile, the European Union has taken the lead in adopting the world's first comprehensive set of rules for cryptoassets regulation (MiCa).