Charity joins MPs calling for cryptocurrency to be regulated as gambling
"One minute you're winning, the next you're losing"
Consumer cryptocurrency trading should be regulated as gambling, the Treasury Committee has urged.
In a new report, the committee called for consumer trading in unbacked cryptoassets to be treated in regulation as gambling.
It's as the cross-party committee of MPs said cryptocurrencies such as Bitcoin are being used by criminals in scams and money laundering.
Unbacked cryptoassets - often called cryptocurrencies - are not supported by underlying assets, the committee added.
They pose significant risks to consumers, given their price volatility and the risk of losses, according to the MPs, who said retail trading in unbacked crypto more closely resembles gambling than a financial service and should be regulated as such.
'Same risk, same regulatory outcome'
The report said: "We strongly recommend that the Government regulates retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service, consistent with its stated principle of 'same risk, same regulatory outcome'."
The committee pointed to HM Revenue and Customs (HMRC) figures indicating that around 10% of UK adults hold or have held cryptoassets.
"One minute you're winning, the next you're losing."
Ian Semel is the boss of gambling charity, Break Even, which has bases in Norwich, Ipswich and Newmarket.
He thinks there should be better regulations to protect the most vulnerable people: "People need to be really aware that if they are going to enter into this trading, they can lose whatever they invest, it's no guarantee to make money - it goes up and down.
"One minute you're winning, the next you're losing."
He says there are a lot of unregulated companies exploiting consumers: "Some will give you money in the early days to show you how easy it is, then, once you start investing more money, that's when you hear people losing thousands and thousands of pounds.
"it's either through con-artists, or people who genuinely don't know how to trade and put no limits on their accounts."
"Potential productive innovation"
The MPs also said potential productive innovation in financial services should not be unduly constrained.
They said technologies underlying cryptoassets may bring some benefits to financial services, particularly for cross-border transactions and payments in less developed countries.
A balanced approach should be taken to supporting the development of cryptoasset technologies, while avoiding spending public resources on projects without a clear, beneficial use, the MPs said.
"A wild west"
Harriett Baldwin, chair of the Treasury Committee, said: "The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a wild west.
"Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK's financial services industry.
"However, with no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service, and should be regulated as such.
"By betting on these unbacked 'tokens', consumers should be aware that all their money could be lost."
The committee is considering central bank digital currencies as a separate piece of work.
A Treasury spokesperson said: "Risks posed by crypto are typical of those that exist in traditional financial services and it's financial services regulation - rather than gambling regulation - that has the track record in mitigating them.
"Crypto offers opportunities but we are taking an agile approach to robustly regulating the market, addressing the most pressing risks first in a way that promotes innovation."