The treasury select committee, a prominent cross-party group of U.K. lawmakers, has released a report suggesting that retail investing in unbacked cryptocurrencies, such as bitcoin, should be regulated similarly to gambling.
In their findings published on May 17, the committee “strongly recommended” the adoption of regulations akin to those governing gambling activities for the trading of digital tokens.
A misleading perception of safety
Expressing their concerns, the recently published report by the treasury committee (appointed by the House of Commons) stated that regulating retail trading and investment in unbacked crypto assets as a financial service could potentially create a misleading perception of safety and protection among consumers.
The report emphasizes the risk of a “halo” effect, where individuals might mistakenly believe that their investments are more secure than they really are. The panel of experts highlights the importance of avoiding false assurances and ensuring that consumers are aware of the risks associated with engaging in such activities with unbacked crypto assets.
As a critique, the report also puts the U.K. government under fire for allocating public resources to support crypto activities that lack a clear and beneficial use case, according to a recent report.
The report specifically highlighted the Royal Mint’s abandoned proposal to create a nonfungible token (NFT) as an example of misguided allocation of public funds.
The scrutiny raises questions about the government’s role in promoting and funding crypto-related initiatives and the need for a more discerning approach to ensure responsible allocation of public resources in the digital asset space.
CryptoUK, a trade body representing the digital asset sector in the U.K., responds to this announcement by stating in their own release that they strongly disagree with the treasury select committee’s conclusion.
Given the exemption of gambling from capital gains tax, the crypto community is now prompting inquiries into whether the government intends to forego significant tax revenue amounting to tens of millions of pounds generated from the buying and selling of unbacked crypto assets.
The committee’s stance stands in contrast to the government’s previous proposal, put forward in February, which advocated for regulating cryptocurrencies as part of the existing financial services framework.
As part of these proposed guidelines, exchanges would be mandated to establish comprehensive admission standards and disclosure requirements for token issuers seeking to list new assets.