MPs propose treating UK crypto trading like gambling regulation.

The report cautions individuals about potential complete loss in asset price betting.

Following a fresh inquiry, the UK Treasury committee advises classifying cryptocurrency trading as gambling rather than a financial service. In a Wednesday report, MPs stress the need for the government to prevent misusing taxpayer funds on promoting technologies like digital tokens without clear public benefits. The report underscores the addictive nature of cryptocurrency trading, akin to gambling. While acknowledging blockchain’s potential in the financial sector, MPs warn that speculating on unsupported assets like bitcoin could lead to substantial financial losses for consumers.

Conservative MP and Treasury committee Chair Harriett Baldwin highlights the crucial role of effective regulation to protect consumers and promote meaningful innovation in the UK’s financial services. She argues that due to the lack of intrinsic value, volatile price changes, and the absence of tangible social benefits, consumer trading of cryptocurrencies, such as bitcoin, more closely resembles gambling than a financial service and should be regulated accordingly.

Consumers participating in speculation with these unsupported “tokens” should be fully cognizant of the potential complete loss of their invested funds.

These recommendations may influence the government’s upcoming cryptocurrency regulation plans, currently under review after a consultation earlier this year.

The Treasury committee is worried that classifying cryptocurrency trading or investing as a financial service, subject to regulation by the Financial Conduct Authority (FCA), could create a misleading sense of safety for consumers. They term this as a “halo effect,” where individuals might wrongly perceive the industry as safer and assume protection against financial losses.

The report suggests that regulating cryptocurrencies as gambling would align with the government’s principle of “same risk, same regulatory outcome.”

A Treasury spokesperson notes that the risks associated with cryptocurrencies are similar to those in traditional financial services. Historical evidence indicates that financial services regulation, rather than gambling regulation, has effectively addressed these risks.