A group of MPs have said trading in cryptocurrencies such as bitcoin should be legally classified as a form of gambling because currencies do not serve a "beneficial social purpose".
The Financial Services Committee released its report on cryptocurrency regulation amid widespread concerns over the lack of oversight of trading in the highly volatile asset. A 2018 finance committee report called the cryptocurrency industry a "wild west".
'Nothing we have heard during our ongoing investigation has changed that impression,' the commission said today.
The report says that while certain forms of cryptocurrency and broader blockchain technology may offer some benefits, the market is currently dominated by “consumer speculation in insecure crypto assets such as Bitcoin and Ether.”
"These characteristics are more consistent with gambling than with a financial service, an impression supported by the evidence we obtained from consumer behavior," the commission said.
“Unsecured crypto-assets have no intrinsic value and their price volatility exposes consumers to the potential for significant profit or loss without serving any useful social purpose.
While many have called for cryptocurrencies to be regulated by the city's financial watchdog, the Financial Conduct Authority, the Financial Conduct Authority has warned that this could lead to a "halo effect" where people think these currencies have a whiff of legitimacy because they are regulated alongside them. . traditional financial products.
"Therefore, we urge the government to regulate retail activities and investments in unsecured crypto assets as gambling, rather than a financial service, in accordance with its stated principle of 'same risk, same regulatory outcome,'" the committee said.
This means that the Gambling Commission will be responsible for regulating cryptocurrencies and trading companies will need to apply for a gambling license. Cryptocurrency company profits are also likely to be subject to share fees in the framework of this proposal.
However, cryptocurrency industry body CryptoUK strongly disagrees with MPs.
CryptoUK adviser Ian Taylor said: “CryptoUK disagrees with the conclusion of the Finance Committee and we are concerned and disappointed by these unnecessary, dangerous, fundamentally flawed and baseless allegations. The statement does not reflect the true nature, purpose and potential of the cryptocurrency industry.
Professional investment managers view Bitcoin and other crypto-assets as a new alternative asset class rather than a form of gambling, and institutional adoption of insecure crypto-assets has skyrocketed.
In addition, games of chance are exempt from capital gains tax. Does the government really want to take tens of millions of pounds in tax revenue from the profits made from buying and selling unsecured crypto assets?
Among the panel's findings, three-quarters of bitcoin investors lost money between 2015 and 2022, which it said proved the market was "driven by new entrants" while early adopters and insiders" paid out of pocket".
The report did not take into account the Bank of England's plan to launch its own digital currency, Bitcoin, which is instead included in a separate report. Unlike many assets criticized by the Treasury Committee, the Bank of England cryptocurrency will be pegged to the value of the British pound.