Dan Mochulski, CEO of eToro UK
This week we heard from the Treasury Select Committee that investing in cryptocurrencies is like gambling and should be treated as such by the UK government.
While the fact that cryptocurrencies are now clearly high on policymakers' agendas is a positive development, these claims about gambling seem misleading and confusing.
Crypto is still an emerging financial asset and naturally has risks and volatility, but investing in crypto is not the same as gambling.
Basically, a bet is a limited event. An event either happens or it doesn't. This is not the case with crypto investing. Coin values can go up and down just like investing in stocks, and time will tell if there are winners and losers.
READ MORE. The financial committee's call to regulate digital assets such as the gaming industry has drawn strong criticism from crypto leaders.
As with any risky and volatile asset, investing in cryptocurrencies is about educating yourself and understanding the risks you are willing to take. Also remember that there are thousands of different cryptoassets with different features and use cases.
Some coins are worth avoiding, while others can be a profitable, albeit volatile, investment over a few years. Calling crypto a game, as the Treasury Department has done, takes too narrow a view of an asset class that thrives on multiple assets.
The Finance Committee needs to clarify what it means to "treat crypto as gambling" and how to reach this conclusion.
Real assets can be bought with cryptocurrencies and we are seeing more and more examples around the world. It is used in universal basic income projects and as a store of wealth by citizens of countries affected by conflict or hyperinflation. In all these examples, the definition of the game is difficult to maintain.
No one can claim that the crypto industry is in perfect shape. The high-profile crash exposed the vulnerability of the crypto ecosystem and rightly fueled calls for urgent regulation. However, I have no idea how a simple definition of cryptocurrency as a gambling product is going to solve the problems the commission associates with this asset class.
Cash is used by criminals, stock values can go to zero, global currencies can collapse, but there is no need to reclassify this asset class as gambling.
Cryptocurrencies are an alternative asset class that have found their place in diversified investment portfolios and are increasingly being invested in both privately and institutionally around the world.
A recent survey in the United Kingdom found that between 5% and 6% of the population own cryptocurrencies, which equates to several million people. There would be many reasons why these people would put their money in this asset class, price speculation aside, and comparative gambling really rules them out.
To emphasize this point, in a recent Retail Investor Beat survey of 10,000 retail investors worldwide, we asked those who own cryptocurrencies about their motivations for investing. While the ability to generate high returns is the most cited option (42% chose this option), competition is fierce. More than a third (36%) say they believe in the power of blockchain technology, while 33% see it as a transformative asset class. These people will not recognize their investment as gambling.
It is encouraging to see lawmakers recognize the need for a crypto debate. However, the focus should be on building a coherent crypto-regulatory framework that raises standards, provides more protection to consumers, weeds out bad actors and encourages innovation.
The UK has the opportunity to be at the forefront of crypto policy. Not taking advantage of this opportunity can become a real gamble.
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