U.K Government Rejects Lawmakers’ Proposal to Regulate Crypto Like Gambling

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The UK government rejected a House of Commons Treasury Committee proposal to regulate crypto trading in the way it does gambling rather than as a financial service.

Such an approach would run completely counter to globally agreed recommendations of international organizations and standard-setting bodies, including the G20 Financial Stability Board, wrote Economic Secretary to the Treasury Andrew Griffith in a response to the proposal published today.

“The Committee’s proposed approach would therefore risk creating misalignment with international standards and approaches from other major jurisdictions including the EU, and potentially create unclear and overlapping mandates between financial regulators and the Gambling Commission,” he said. “If the UK were to unilaterally adopt a system which is out of step with approaches taken globally, this could push cryptoasset activity offshore, reducing the UK’s opportunity to make it safer and capitalise on the potential benefits, while leaving consumers exposed to residual risks.

Crypto Industry Risks Being Pushed Offshore, Government Says

The committee’s proposal had argued that the fast-paced crypto industry required strict regulations to protect investors from deceptive investment schemes.

The government, citing as an example the collapse of FTX, said a system of gambling regulation would be unlikely to address risk factors that include commingling of customer and firms assets, a lack of transaction documentation and excessive leverage.

Gambling regulations also would not be equipped to deal with insider dealing, market manipulation, predatory short selling and many other behaviours that are seen in both crypto asset markets and traditional financial services markets, the government’s response said.

“The crypto asset industry is highly globalised and often borderless in nature,” the government said. “If the UK were to unilaterally adopt a system which is out of step with approaches taken globally, this could push crypto asset activity offshore, reducing the UK’s opportunity to make it safer and capitalise on the potential benefits.”

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