The UK intends to become a ‘global crypto hub’, but the Treasury Committee has warned that consumers will need protecting from the volatile trade of ‘unbacked’ crypto assets.
A new report issued by the UK Treasury Committee has recommended that the UK government regulates the crypto industry as gambling, rather than a financial service.
The report outlines the “addictive” nature of speculative crypto trading, pointing out that while many consumers invest small amounts, a sizeable number of people have lost “life changing sums of money”.
The report is particularly concerned with the retail trading of “unbacked” crypto assets, such Bitcoin and Ether, which the committee doesn’t consider to have “any intrinsic value”. (Crypto Twitter naturally chimed in with questions of what fiat currency is ‘backed’ with, if Bitcoin is considered unbacked.)
Price volatility is a key concern. The report states: “Unbacked cryptoassets have no intrinsic value, and their price volatility exposes consumers to the potential for substantial gains or losses, while serving no useful social purpose. These characteristics more closely resemble gambling than a financial service.”
The Committee fears leading consumers to believe that trading crypto assets is safer than it actually is, citing the principle of “same risk, same regulatory outcome”.
Stablecoins are fine, though.
In relation to the gambling link, the Committee is mostly concerned with ‘unbacked’ assets. This doesn’t seem to include the trade of stablecoins, which are pegged to a more stable asset such as fiat currency or a commodity.
The report views stablecoins as a potential benefit to regulating crypto, pointing out that they can be used to improve transaction speed, cost and efficiency of domestic payments.
Page six of the report details a quote by Ian Taylor from the trade association CryptoUK, who told the Committee that “merchants are starting to see the benefit in the UK of accepting a stablecoin as a means of payment versus a credit card payment, because it is significantly cheaper. Credit card fees are over 2% now. A stablecoin issuer can get that down to 1%.”
Earlier today however, the same organisation published a statement strongly disagreeing with the stance of the report. Taylor criticised the Committee’s omission of most of the positive evidence that CryptoUK provided it with.
He said: “The TSC’s statement does not reflect the evidence we gave the Treasury Select Committee. We set out strong use cases and measures implemented by the industry to track, monitor and report, with robust analytics to mitigate fraud and work closely with regulators and law enforcement agencies to address this.”
The report briefly acknowledges that distributed ledger technologies can help promote financial inclusion in low-income countries with less developed financial sectors.
Quoting Susan Friedman, Head of Policy at Ripple Labs Inc, it states: “It is no secret that the cross-border transfer system is broken. It takes three to five days. Up to 6% is chewed up in fees. Blockchain and crypto can help solve those problems and help money move much more efficiently than it does in the current system.”
While many crypto organisations have clapped back at the Committee’s view on crypto as gambling, the report is a recommendation rather than a mandate. It’s unclear whether the government will take the Treasury’s advice, but Economic Secretary Andrew Griffith appears to take a favourable, proactive approach toward crypto, winning favour with Coinbase CEO Brian Armstrong.
Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.