The UK will not treat cryptocurrency trading and investment as a form of gambling, according to Economic Secretary to the Treasury Andrew Griffith MP.
Back in May, the House of Commons Treasury Committee recommended that the government enact such a policy due to the volatility of cryptocurrency trading, which is likened to a form of betting.
In response, Griffith stated that the Treasury ‘firmly disagrees’ with the assessment made by the Committee, which is Chaired by his fellow Conservative MP, Harriet Baldwin.
In particular, he argued that this would be contrary to globally agreed recommendations from international organisations and standards bodies, such as the Organization of Securities Commissions (IOSCO)1 and the G20 Financial Stability Board (FSB).
The Treasury believes that the Committee’s recommendation, based on a principle of ‘same activity, same risk, same regulatory outcome’, could have negative implications for cooperation between the UK and other nations as well as British regulatory bodies.
Griffith elaborated: “The Committee’s proposed approach would therefore risk creating misalignment with international standards and approaches from other major jurisdictions including the EU, and potentially create unclear and overlapping mandates between financial regulators and the Gambling Commission.”
These government concerns were elaborated on further in its response, with the Treasury stating that the Commission has a ‘strong track record’ of safeguarding consumers, but that overseeing financial risks does not fall within its remit.
The Secretary continued: “A system of gambling regulation could also fail to appropriately mitigate many of the critical risks that were discussed in HM Treasury’s recent consultation on cryptoasset regulation – including those associated with market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.”
Instead, the Treasury will continue with its course of action to regulate crypto under a financial services framework. This will be complete with ‘robust measures’ around the consumer risks highlighted by May’s Committee report.
Parliamentarians had criticised this approach in the initial report, stating that such action would create a false impression of security for cryptoassets, the most dominant of which are cryptocurrencies such as Bitcoin and Ether.
The Treasury has, however, acknowledged that there is potential for ‘significant risks and consumer harm’ from crypto trading, notably citing the collapse of FTX last year, which led to significant turmoil in global cryptoasset markets.
‘Concrete action’ on crypto regulation is therefore on the horizon, Griffith emphasised in his letter to the Committee – but the sector will not be treated in the same way as bookmaker and casino counterparts.
He concluded: “I look forward to continuing to work with the Committee as we deliver on our ambition to make the UK a leading jurisdiction for cryptoasset technology and investment, underpinned by clear and robust regulation.”