In the recent years, cryptocurrency trading has become increasingly popular, with many people investing in Bitcoin, Ethereum, and other cryptocurrencies. But for influential MPs, crypto trading should be treated as a type of gambling.
A report from the All-Party Parliamentary Group (APPG) on Gambling Related Harm suggests that cryptocurrencies should be included in the Gambling Act 2005, which regulates gambling in the UK. The report argues that crypto trading has many similarities to traditional gambling, such as high volatility, lack of regulation, and the potential for addiction.
The report’s key recommendation is that the UK’s gambling regulator, the Gambling Commission, should be given the power to regulate cryptocurrencies. This would mean that crypto exchanges and platforms would have to adhere to the same standards as traditional gambling operators, such as conducting due diligence on customers, implementing responsible gambling measures, and reporting suspicious activity.
The APPG’s report has divided opinion among experts and investors. Some argue that crypto trading is not gambling, as it involves investing in assets that have real-world value. Others believe that cryptocurrency trading has many characteristics of gambling, such as the high risk and uncertainty involved, and the potential for investors to become addicted.
One of the reasons for the APPG’s recommendation is the recent surge in crypto-related scams and frauds. As cryptocurrencies are largely unregulated, fraudsters have been able to exploit investors with fake ICOs, Ponzi schemes, and other scams. The report argues that regulating cryptocurrencies would help to protect investors and reduce the risk of fraud.
Another reason for the recommendation is the potential for crypto trading to become addictive. As with gambling, investors can become obsessed with the highs and lows of the market, and may end up losing more than they can afford. The report warns that without regulation, crypto trading could lead to a rise in problem gambling and other related harms.
The report’s recommendations have been welcomed by anti-gambling campaigners, who argue that there is a clear overlap between gambling and crypto trading. However, some experts have criticized the report for oversimplifying the complex issues involved in regulating cryptocurrencies.
For example, some argue that regulating cryptocurrencies would be difficult, as they are decentralized and largely anonymous. This means that it would be hard for regulators to monitor and enforce the rules, and could lead to a rise in underground trading and illegal activity.
Others have argued that crypto trading should not be treated as gambling, as it involves investing in assets that have real-world value. Some also argue that crypto investors are more likely to be educated and informed, and less likely to be vulnerable to gambling-related harms.
Ultimately, the question of whether crypto trading should be treated as a form of gambling is a complex and controversial issue that will require further debate and analysis. However, it is clear that the rise of cryptocurrencies has raised many challenges and opportunities for regulators, investors, and other stakeholders in the industry. As cryptocurrencies continue to grow in popularity and influence, it is likely that the debate over their regulation and status will intensify in the years to come.
A report released by the influential Treasury Committee has called for the regulation of consumer trading of digital currencies, including Bitcoin and Ether, as a form of gambling. The MPs described digital currencies as having “no intrinsic value and no useful social purpose”, with their volatility creating a significant risk for consumers. Around 10% of UK adults are believed to have speculated in cryptoassets, with concerns growing about addiction and the limited controls currently in place to protect vulnerable consumers. The Treasury Committee’s report warned that bringing the industry under financial service regulation “will create a ‘halo’ effect that leads consumers to believe that this activity is safer than it is, or protected when it is not”. Instead, it was recommended that the industry should be regulated consistent with the same approach used to regulate lotteries, betting firms, and casinos.
This report comes as the government considers responses to its own consultation into the regulation of the crypto industry and follows a 2018 report that described the industry as a “Wild West”. However, MPs still believe there is potential for the technology to improve the efficiency and reduce the cost of making payments, advising the government to take a “balanced approach”. The report also criticized the government’s Royal Mint’s attempt to launch a non-fungible token (NFT) through the Royal Mint, noting that the public resources spent on supporting cryptoasset activities should have a clear, beneficial use case.
A spokesperson for the Treasury rejected the Committee’s recommendation, indicating that the risks posed by cryptoassets are typical of those that exist in traditional financial services. They noted that financial services regulation had the track record of mitigating those risks and that taking an agile approach to robustly regulating the market would promote innovation.
This report comes amid growing pressure on governments globally to regulate the industry better, following the sudden bankruptcy of crypto platform FTX in November and a recent EU approval of tougher cryptoasset rules, which includes powers to ban exchanges that fail to protect consumers. The International Organisation of Securities Commissions (IOSCO), whose members include regulators in the US and UK, is planning to announce proposals for the first set of global rules covering crypto trading soon.
In conclusion, the Treasury Committee’s report recommending the regulation of consumer crypto trading as a form of gambling reflects growing concerns about crypto trading’s impact on public finances. With digital currencies’ volatility and lack of intrinsic value, they represent a significant risk to consumers. It is crucial for governments globally to work together to regulate the industry, taking an agile approach to robustly regulating the market, thereby promoting innovation and protecting consumers.
