A proposal to treat crypto like gambling has been rejected by the UK government in a reply that was printed yesterday, 19 July. It “firmly disagreed” with the stance made by the House of Commons Treasury Committee.
On 17 May 2023, a committee consisting of a panel of British lawmakers called for regulating the UK crypto market similar to gambling. A response to this was given by the UK Economic Secretary to the Treasury – Andrew Griffith – today, 20 July.
While the HM Treasury did not agree to the recommendation of regulating “retail trading and investment activity in unbacked crypto assets as gambling rather than as a financial service”, it welcomed the recommendation of taking a “balanced approach to supporting the development of crypto asset technologies”.
According to them, the recommendations were grounded in the principle of “same risk, same regulatory outcome”. This meant that any crypto asset activity that performs a similar function, and poses similar risks, to those in the traditional financial system are subject to regulation that ensures equivalent outcomes.
As a result, the Committee’s proposed approach would “….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.”
Therefore, it would run “completely counter to globally agreed recommendations from international organisations and standard-setting bodies”. This includes the ones like the International Organization of Securities Commissions (IOSCO) and the G20 Financial Stability Board (FSB).
On top of this, the Treasury also believed that the system of gambling regulation could fail to “appropriately mitigate many of the critical risks that were discussed in HM Treasury’s recent consultation on crypto asset regulation”. This includes those associated with market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.
At the end, the government added that it is already taking concrete action on regulating the crypto market. This has been through the introduction of a dedicated financial promotions regulatory regime for crypto assets.
A legislation was laid before Parliament and debated last month, which will soon be in force by late 2023. HM Treasury’s recent consultation would also seek to ensure that consumers have access to accurate information when making investment decisions. In doing the same, the committee’s recommendations were also taken into consideration.
On setting standards for the crypto industry and crypto firms, the government noted: “HM Treasury and the FCA will work with the industry to ensure crypto firms are made fully aware of the standards required for approval at the FSMA gateway. Further communications will be provided in due course to ensure standards for approval are clearly available to crypto firms operating in the UK.”
