The consideration of cryptoassets as a form of gambling by the UK regulator would not align with the global and European Union stance on the matter and would fail to effectively address risks associated with the sector, according to Andrew Griffith, Economic Secretary to the UK Treasury.
UK Government opposed to reguating cryptoassets
The Treasury Select Committee had previously recommended in a report issued in May to address cryptocurrencies such as bitcoin. At that time it was suggested that cryptocurrencies should be classified and regulated in the same way as gambling due to the substantial risks they pose to consumers. Lawmakers expressed concerns that categorizing these assets as financial services might mislead consumers into believing they are safer investments. UK regulators have been vocal about identifying the risks of investing in funds such as the highly volatile crypto market.
Despite the ongoing efforts to establish a strong crypto ecosystem and blockchain technology in the country, the UK Government is firmly opposed to the proposal of regulating retail trading and investment activities in unbacked cryptoassets as gambling rather than financial services. In response to the committee’s report, Andrew Griffith emphasized that such a gambling-oriented approach would not adequately address the risks exposed by incidents like the collapse of crypto exchange FTX.
Overlapping mandates between financial regulators and the Gambling Commission will not work
Minister, aligning with international consensus and standards is crucial for the UK. Griffith noted that globally agreed recommendations from prominent standard-setting bodies like the International Organization of Securities Commissions (IOSCO) and the G20 Financial Stability Board (FSB) advise against treating cryptoassets as gambling.
The IOSCO has already put forth the world’s first set of rules for the crypto sector in May, and the FSB followed suit with additional standards released on Monday. Minister Griffith cautioned that the committee’s proposed approach might create misalignment with these international standards and cause confusion by overlapping mandates between financial regulators and the Gambling Commission.
The European Union, for its part, has recently approved comprehensive rules for trading cryptoassets, set to take effect from mid-2024 onward.
At present, the UK’s Gambling Act does not classify buying or selling cryptocurrencies as gambling. The country’s gambling watchdog stated that any changes to the Act would be a matter for the government to decide.
A global challenge
However, the watchdog has previously initiated an investigation into Sorare, a Softbank-backed fantasy sports company that employs cryptocurrency for trading non-fungible tokens (NFTs) representing sports stars, aiming to assess whether the game falls under gambling regulations.
Looking ahead, Britain is gearing up to introduce rules for the regulation of stablecoins, a type of cryptocurrency backed by underlying assets to maintain a stable value, as opposed to the inherently volatile “unbacked” cryptocurrencies. As the crypto landscape evolves, striking the right balance between regulation and innovation remains a critical challenge for policymakers in the UK, but this is not a dissimilar challenge for the rest of the world.