The Treasury Committee of UK MPs has called on the government to regulate consumer trading in unbacked cryptoassets as a form of gambling.
In a new report, the cross-party committee of MPs claims that cryptocurrencies such as Bitcoin have no intrinsic value and serve no useful social purpose, while consuming large amounts of energy and being used by criminals in scams, fraud and money laundering.
Unbacked cryptoassets – often called cryptocurrencies – are not supported by any underlying asset, it says. They are the most prominent form of crypto, with Bitcoin and Ether alone accounting for two-thirds of all cryptoassets.
“The committee concludes that cryptocurrencies pose significant risks to consumers, given their price volatility and the risk of losses. Given retail trading in unbacked crypto more closely resembles gambling than a financial service, the MPs call on the Government to regulate it as such,” the committee stated.
“The committee is also concerned that regulating consumer crypto trading as a financial service – as proposed by the government – will create a ‘halo’ effect, leading consumers to believe this activity is safe and protected, when it is not.”
The committee said it considers central bank digital currencies (CBDCs) – digital currencies backed by a central bank such as the Bank of England – as a separate entity.
Around 10% of UK adults hold or have held cryptoassets, according to HM Revenue & Customs.
The MPs, however, recognised that technologies underpinning cryptoassets may bring benefits to financial services – particularly for cross-border transactions and payments in less developed countries – and called on the government and regulators to keep pace with developments.
“The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a Wild West,” said Harriett Baldwin MP, chair of the Treasury Committee.
“Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry.
“However, with no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service, and should be regulated as such.
“By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”