London-based self-regulatory organization CryptoUK and popular cryptocurrency exchange Kraken UK have strongly criticized a recent report by a panel of British lawmakers that suggested regulating cryptocurrencies like gambling.
The Treasury Committee’s report, released on May 17, recommended classifying unbacked cryptocurrencies as gambling due to concerns over consumer risks such as price volatility and lack of intrinsic value.
The committee’s proposal for “same risk, same regulatory outcome” did not sit well with local industry players, particularly considering the UK’s aspirations to become a leading cryptocurrency hub.
CryptoUK argued that such an approach fails to consider the intricacies of the crypto sector and the potential for inward investment and economic growth in the UK.
It pointed out that no other jurisdiction has adopted this strategy, and referred to the EU’s Markets in Crypto-Assets Regulation (MiCA) as an example of the need for tailored regulations that don’t create a hostile environment for businesses.
CryptoUK also cautioned that the committee’s recommendation could drive UK consumers to seek offshore crypto platforms, which goes against the objective of consumer protection through regulation.
Kraken UK, managing director stated in its statement that they strongly disagreed with the committee’s conclusion that crypto assets have no intrinsic value. The firm expressed disappointment that the UK is missing an opportunity to be a global leader in the rapidly evolving crypto industry.
It argued that classifying crypto as gambling is misguided and unsuitable for UK consumers, as it fails to recognize the true purpose and potential of the technology. Additionally, it highlighted that gambling regulations do not offer the same level of safeguards as financial services regulations.
CryptoUK raised concerns about the potential loss of capital gains tax if crypto trading were treated as gambling. It questioned whether the UK government intends to forgo substantial tax income from gains made through the buying and selling of unbacked crypto assets.
While the Treasury’s report did not provide specific details on how cryptocurrencies would be regulated as gambling, it recommended implementing robust regulations and guidelines to safeguard consumers, combat money laundering, and prevent terrorist financing.
