Representations of cryptocurrencies are seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
LONDON, July 20 (Reuters) – Treating cryptoassets as a form of gambling would put Britain at odds with global and European Union regulators and fail to mitigate risks from the sector, Britain’s Financial Services Minister Andrew Griffith said on Thursday.
Parliament’s Treasury Select Committee said in a report in May that bitcoin, ether and other “unbacked” cryptocurrencies should be regulated as gambling given the significant risks they pose to consumers.
Lawmakers worry that treating the sector as a financial service would lead to consumers thinking it is safer than it is, with UK regulators warning investors they can lose all their money.
Britain wants to become a global hub for crypto and its related blockchain technology, and is already working on rules for the sector.
The finance ministry “firmly disagrees” with the recommendation to regulate retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service, Griffith told the committee in a response to its report.
A system of gambling regulation would likely not address risks highlighted by the collapse of FTX, a crypto exchange, Griffith said.
It would also run completely counter to globally agreed recommendations from global standard-setting bodies, including the International Organization of Securities Commissions (IOSCO) and the G20 Financial Stability Board (FSB) with input from domestic regulators, he added.
IOSCO proposed the world’s first set of rules for the crypto sector in May, with the FSB following up on Monday with further standards.
“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,” Griffith said.
The EU has approved the world’s first set of comprehensive rules for trading cryptoassets that will come into force from mid 2024 onwards.
Buying or selling cryptocurrencies is not classified as gambling by the UK’s Gambling Act, a spokesperson for the country’s gambling watchdog said.
“Any changes to the Act would rightly be a matter for government,” the spokesperson added.
The watchdog said in 2021 it was investigating a Softbank-backed fantasy sports company, Sorare, in which players use cryptocurrency to buy and sell non-fungible tokens (NFTs) representing sports stars, to see whether the game amounts to gambling.
Britain is due to adopt rules for regulating stablecoins, a form of cryptocurrency which is backed by underlying assets and designed to keep a constant value, as opposed to “unbacked” cryptocurrencies which are typically volatile.
Reporting by Huw Jones; additional reporting by Elizabeth Howcroft
Editing by Andrew Cawthore and Sharon Singleton
Our Standards: The Thomson Reuters Trust Principles.
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