The British government has taken a stance against treating crypto trading and investment as a form of gambling, refusing to adopt the proposal put forward by the UK Parliament’s Treasury Committee.
Instead, the government aims to regulate these activities under a financial services framework. Economic Secretary to the HM Treasury, Andrew Griffith, firmly disagreed with the notion of categorizing bitcoin (BTC) and ether (ETH) as “unbacked cryptoassets” with “no intrinsic value” and “no useful social purpose.”
Let’s delve into the reasoning behind the rejection and explore the government’s plans for crypto regulation.
In a report released in May, the UK Parliament’s Treasury Committee suggested regulating retail trading and investment in cryptoassets as gambling, rather than treating it as a financial service.
However, Andrew Griffith expressed strong opposition to this approach, citing established recommendations from international organizations and standard-setting bodies. Griffith emphasized that it is essential to bring crypto trading under a financial services regulatory framework instead.
One of the bodies mentioned by Griffith was the UK Financial Stability Board (FSB), which issued a comprehensive set of nine guidelines for regulating crypto in October 2022.
Notably, the FSB’s guidelines did not endorse the Treasury Committee’s proposal of placing crypto activity under the jurisdiction of the Gambling Commission. This further strengthens the government’s position on the matter.
Griffith argued that adopting a gambling-like approach to crypto trading may lead to an inadequate response to critical risks faced by consumers.
These risks include market manipulation, deficiencies in financial risk management practices, and inadequate prudential arrangements.
To protect consumers and maintain market integrity, the government believes it is more appropriate to establish a financial services regulatory framework for crypto assets.
In February 2023, the UK government released a consultation paper, signaling its first significant step into the realm of crypto regulation.
The paper expressed the government’s willingness to collaborate with digital asset firms in developing a robust regulatory framework.
This approach reflects the government’s commitment to strike a balance between fostering innovation and ensuring consumer protection in the fast-evolving crypto landscape.
In addition to the government’s efforts, the UK’s Financial Conduct Authority (FCA) has been actively considering measures to address concerns related to crypto memes. This signals a proactive approach by the regulatory authorities to tackle emerging challenges in the crypto space.