Bitcoin, the world’s largest cryptocurrency, has been quietly rising in 2023.
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British lawmakers say cryptocurrency trading is similar to gambling and should be considered gambling.
Unbacked tokens such as bitcoin and ether They are not backed by underlying assets and have “no intrinsic value,” lawmakers from the Treasury Select Committee said in a report. Report Published Tuesday.
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With a combined market capitalization of $737.7 billion, bitcoin and ether alone account for two-thirds of all cryptocurrencies.
Events in the crypto industry over the past year — from the collapse of crypto exchange FTX to the decline of stablecoin experiment Terra — have drawn intense scrutiny from regulators concerned about the negative impact on consumers.
Increased volatility and the potential to lose large sums of money mean cryptocurrencies pose a significant risk to consumers, the Treasury Department select committee said in its report Tuesday.
“Given that retail transactions of unsecured cryptocurrencies are more like gambling than financial services, members of Congress are calling on the government to regulate them,” the lawmakers said.
“The events of 2022 have highlighted the risks to consumers in the crypto asset industry, much of which remains the Wild West,” Harriet Baldwin, chairman of the Treasury Select Committee, said Tuesday. She added: “Effective regulation is clearly needed to protect consumers from harm and support productive innovation in the UK financial services sector.”
“However, with no intrinsic value, huge price swings, and no apparent social benefit, consumer transactions in cryptocurrencies like Bitcoin are more like gambling than financial services and should therefore be regulated. By betting on these unsecured Consumers should be aware that all their money could be lost.”
Around 10% of U.K. adults own or have owned cryptocurrencies, according to U.K. tax agency HM Revenue & Customs.
The Treasury committee said it was concerned by the government’s proposal to regulate consumer cryptocurrency transactions as a financial service. Lawmakers say this creates a “halo” effect, leading people to believe that crypto transactions are safe and protected, when they are not.
In February, the government laid out plans to regulate crypto assets and made recommendations for a consultation window that closes on April 30.
Such a regulatory framework could allow cryptocurrency firms to apply for bespoke licenses to operate in the U.K. — historically, a major point of contention for U.K. companies. The Financial Conduct Authority, the de facto regulator of cryptocurrency companies under the country’s money laundering regime, has set high standards for approving cryptocurrency licenses.
Blair Halliday, UK managing director of top US cryptocurrency exchange Kraken, said: “We fundamentally disagree with the Treasury Select Committee’s conclusion that crypto assets have no intrinsic value. It is regrettable that the Committee does not support the UK’s chances of becoming a true global leader in our fast-growing industry.”
“We firmly believe that the UK government and the FCA are on the right track, putting in place regulations to support innovation while building the necessary guardrails and customer protections,” Halliday added. “Kraken will continue to work with lawmakers to help achieve these goals.”
In April, a senior U.K. government official told CNBC that he expects to see specific regulation of cryptocurrencies in the U.K. within the next 12 months.
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