The implementation of a more stringent crypto regulation framework has been called for members of parliament, who described the volatile nature of decentralised assets as similar to that of gambling.
The prominent Treasury Select Committee recently published a fresh report of the regulation of crypto assets, in which they urged the government to approach the industry in the same way as gambling due to their inextricable links.
It also details the possibility of introducing a regulatory framework in order to effectively navigate the associated risks that come with cryptoassets, without restricting the industry’s growing prominence and real-world applications.
It also “strongly” recommends that the government treats investment opportunities in unbacked crypto coins as gambling rather than as a financial service.
An insert from the report reads: “Unbacked cryptoassets have no intrinsic value, and their price volatility exposes consumers to the potential for substantial gains or losses, while serving no useful social purpose.
“These characteristics more closely resemble gambling than a financial service, an impression reinforced by the evidence we have received of consumer behaviour.”
The overarching push from the committee to place crypto regulation in the same bracket as gambling stems from the possibility of further compliance burdens, which, would in turn, spur market consolidation.
Compliance costs would largely impact smaller companies with limited resources, thus consolidating the market, but further safeguards such as licensing, customer due diligence, and responsible gambling practices are likely to sift the duds and create a fairer, less saturated market, which would ultimately lead to a safer industry for investors.
Sarah Pritchard, an executive director at the UK’s Financial Conduct Authority (FCA), recently concurred with the committee’s report, saying: “We cannot develop the regulatory regime alone – we need input from industry.
“But we also need input from policymakers – here and abroad – and consumers. We need a conversation about the risks of crypto and the appetite for not just wins, but losses.
“Regulation may be able to mitigate some of the harm, but it will not be able to stop all risk – in particular risk of financial loss.”