The United Kingdom’s economic and finance ministry, HM Treasury, has firmly denied proposals by the House of Commons’ Treasury Committee to regulate cryptocurrencies like gambling. In May, the UK Treasury Committee called for unbacked cryptocurrencies to be regulated in a similar manner to gambling, citing the speculative nature of these assets. However, the government has strongly disagreed with this recommendation, stating that it goes against internationally agreed recommendations from organizations such as the International Organization of Securities Commissions and the G20 Financial Stability Board.
The Government’s Response
Andrew Griffith, Britain’s Financial Services Minister, stated that treating cryptocurrencies as a form of gambling would not effectively address the risks associated with these assets. He argued that a system of gambling regulation would fail to mitigate critical risks such as customer asset commingling, market manipulation, inadequate prudential arrangements, and deficiencies in financial risk management practices. Instead, the government asserts that a financial services regulatory framework is more appropriate for addressing these risks and fostering safe innovation.
The UK government emphasized that they are already taking steps to regulate the crypto market and have proposed a regulatory legislation that has been laid with the parliament. It is expected that this legislation will come into force by the end of the year. HM Treasury and the Financial Conduct Authority (FCA) will collaborate with the industry to ensure that crypto firms are aware of the required standards for approval at the Financial Services and Markets Act (FSMA) gateway.
The Government’s Stance on Cryptoassets
While the UK government rejects the idea of regulating cryptoassets as gambling, it acknowledges the potential benefits of certain cryptoassets and underlying technologies in improving efficiencies in financial markets and payments. This stance aligns with the country’s ambitions to establish itself as a leading crypto hub, a proposition that was initially put forth by Rishi Sunak when he was the finance minister and is now being pursued by the current Prime Minister.
In addition to disagreeing with the classification of cryptocurrencies as gambling, the government supports the Treasury Committee’s recommendation for a balanced approach to supporting new innovations, including cryptoasset technologies. This stance highlights the commitment to fostering innovation while ensuring that appropriate regulatory measures are in place to protect investors and maintain market integrity.
The UK government’s rejection of treating cryptocurrencies as gambling demonstrates its intention to adopt a comprehensive financial services regulatory framework for overseeing and fostering safe innovation in the crypto market. By aligning with international recommendations and working toward legislation to regulate the industry, the government aims to strike a balance between supporting innovation and safeguarding against potential risks. As the crypto market continues to evolve, the UK’s approach will play a crucial role in shaping the future of the industry in the country.
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