The United Kingdom is aspiring to become a center for digital assets, much like London is for traditional finance. However, this plan is facing obstacles from regulators and policymakers who want to regulate heavily.
A group of UK lawmakers released a report in May stating that crypto assets should be regulated as gambling due to their potential use by fraudsters and the significant risks they pose to consumers. This is consistent with the stance taken in the United States, with policymakers labeling digital assets with various terms, including ‘shadow banking’ and ‘casino chips.’
The UK Treasury Committee believes that regulating retail trading and investment in unbacked cryptocurrencies could create a ‘halo’ effect, leading consumers to believe the activity is safer than it is or that they are protected when they are not. Therefore, the committee recommends that the government regulates trading and investment in unbacked cryptoassets as gambling, rather than as a financial service, to provide a ‘same risk, same regulatory outcome.’
“We therefore 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’.”
Chair of the Treasury Committee, Harriett Baldwin, referred to the industry as a “wild west,” highlighting the risks posed to consumers. In April, the economic secretary to the UK Treasury, Andrew Griffith, announced that crypto regulations would be introduced in the next 12 months.
Despite the pushback, Prime Minister Rishi Sunak is determined to promote the UK as a crypto hub. However, resistance is coming from the Treasury and Central Bank, with Bank of England Governor Andrew Bailey arguing that Bitcoin and similar assets have “no intrinsic value.” UK banks are also increasingly refusing to work with crypto companies and placing barriers for their customers.