The UK government has rejected a proposal from lawmakers to regulate cryptocurrencies in a manner similar to gambling, arguing that its existing plans are better suited to address the risks associated with events like the collapse of FTX, a prominent crypto exchange. The rejection was outlined in a document published on Thursday, which responded to concerns expressed by the House of Commons Treasury Committee earlier in May.
The Treasury Committee had raised apprehensions that the government’s plan to apply rules akin to traditional finance to the crypto sector was too lenient, creating a false sense of safety among investors in cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH). However, the government firmly disagreed with the Committee’s recommendation regarding the regulation of retail crypto trading and investment.
The government’s response argued that implementing a system of regulation akin to gambling laws, in isolation, would not effectively address critical risk factors associated with cryptocurrencies. For instance, it wouldn’t tackle issues like the commingling of customer funds that has been alleged against FTX, nor would it adequately address concerns related to insider trading and market manipulation, which are typically covered by traditional financial regulations.
Crypto adoption in the UK
Furthermore, the UK government highlighted that adopting gambling regulation for cryptocurrencies would significantly deviate from its intended approach, which aligns with the recommendations put forth by global standard-setting bodies. Notably, these recommendations have been recently endorsed by finance ministers from the G20 member countries. The government cautioned that such divergence in regulation could lead to the crypto industry moving offshore, which is contrary to its goal of fostering the UK as a crypto hub.
In 2022, Rishi Sunak, who was the finance minister at the time and is now the prime minister, expressed aspirations of positioning the UK as a leading crypto hub. However, the crypto sector has raised concerns that the country’s regulatory framework is lagging behind other competing jurisdictions, notably the European Union.
Despite these challenges, the UK government remains steadfast in its position, asserting that its current proposals for regulating cryptocurrencies strike a balance between fostering innovation and ensuring adequate protection for investors and consumers. It believes that aligning with international standards is vital to establish the UK as a responsible and attractive destination for crypto-related businesses.
