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In May, lawmakers advocated for regulation of retail trading and investment activity in unbacked crypto assets as gambling instead a financial service.
UK finance ministry has “firmly disagreed,” saying the move would be ineffective in addressing risks identified following FTX collapse.
The move would also strain Britain’s relationship with global and European Union regulators.
Meanwhile, Britain is underway with crypto sector rules toward becoming a global industry hub.
The United Kingdom Finance Ministry has shrugged off calls to regulate Bitcoin and cryptocurrencies as gambling in a fit to maintain the country’s good standing with global and European Union regulators. The decision comes amid a hot regulatory climate in the global market, with regulators clamping down on cryptocurrencies in a view to exercise control and oversight.
Also Read: JPMorgan, and Wells Fargo, among others, join Federal Reserve’s “FedNow” payment system.
In May, the UK Parliament’s Treasury Select Committee recommended that Bitcoin (BTC), Ether (ETH), and every other “unbacked” crypto be regulated as gambling in a bid to protect customers, given the high-risk nature of this asset category. However, as soft a touch an approach as they recommended, it would be contrary to how crypto is treated in most of the rest of the world.
For instance, in the US, crypto comes under the auspice of the Securities and Exchange Commission (SEC), a local financial regulatory authority. However, gambling is not very heavily regulated compared to financial services.
The UK Finance Ministry has rejected the committee’s May recommendations in the latest development.
The ministry, led by the UK government’s Economic Treasury Secretary Andrew Griffith, argues that crypto needs to be regulated by the Financial Conduct Authority (FCA). Notably, this is the equivalent of the US SEC. This means tougher, not softer, regulation, harmonizing the UK’s approach with its ‘global peers.’
Lawmakers argue that treating the cryptocurrency sector like gambling, a financial service, was a recipe for catastrophe, as users would assume the asset class is safe when actually it is not. Specifically, Griffith mentioned the collapse of Sam Bankman-Fried’s crypto empire, saying a gambling-like approach would not be sufficient to avoid a similar outcome as the FTX exchange.
According to Griffith, treating Bitcoin and crypto as a form of gambling would not suffice to avoid sector-related risks. Further, it would strain the relationship between the country and regulators across European and global jurisdictions. Citing Griffith:
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.
Therefore, The development bolsters Britain’s commitment to becoming a headquarters for blockchain technology, with rules and systems already underway.
Cryptocurrency exchange Kraken is among the first to recognize the development, joining other community members who see the favorable ruling.
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