UK strongly opposes crypto regulation as gambling.

UK strongly opposes crypto regulation as gambling.

The Blockchain Industry: A Comprehensive Overview

Source: Pexels / Drew Rae

The United Kingdom’s economic and finance ministry, HM Treasury, has recently denied proposals by the House of Commons’ Treasury Committee to regulate cryptocurrencies as if they were gambling. The committee had suggested this approach in May, arguing that the speculative nature of cryptocurrencies resembles gambling more than it does a financial service. However, the Treasury firmly disagrees with this recommendation, asserting that it goes against globally agreed-upon recommendations from international organizations and standard-setting bodies, such as the International Organization of Securities Commissions and the G20 Financial Stability Board.

The Risks of Treating Cryptocurrencies as Gambling

According to Britain’s Financial Services Minister Andrew Griffith, regulating cryptoassets as gambling would fail to address critical risks associated with these assets. For instance, it would not effectively mitigate issues like the commingling of customer assets, as seen in the case of the failed crypto exchange FTX. Additionally, it would neglect concerns related to market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices. Therefore, the UK government believes that a financial services regulatory framework is more appropriate for addressing the risks of unbacked cryptoassets and fostering safe innovation.

The government is already taking steps to regulate the crypto market and has proposed legislation that is currently under consideration in parliament. It is expected that the regulatory framework will be in force by the end of this year. HM Treasury and the Financial Conduct Authority (FCA) will collaborate with the industry to ensure that crypto firms are fully aware of the necessary standards for approval at the Financial Services and Markets Act (FSMA) gateway.

UK’s Ambitions as a Global Crypto Hub

While the UK government disagrees with regulating cryptoassets as gambling, it acknowledges the potential of certain cryptoassets and underlying technologies to enhance efficiencies in financial markets and payments. This aligns with the country’s aspirations to become a global crypto hub, a vision introduced by Rishi Sunak, the former finance minister and current prime minister.

The government also welcomes the Treasury Committee’s suggestion of adopting a balanced approach to support new innovations, including cryptoasset technologies. Such an approach is consistent with the UK government’s current strategy, which primarily focuses on regulating cryptoasset activity, clarifying tax treatment, and participating in international organizations to shape and develop global standards.

To further promote the efficiency, resilience, and transparency of the market, the UK government plans to establish Financial Market Infrastructure (FMI) sandboxes. These sandboxes will provide companies with the opportunity to experiment with blockchain technology, fostering innovation and driving the market towards greater efficiency.

In conclusion, while the UK government rejects the notion of regulating cryptoassets as gambling, it acknowledges the potential benefits of cryptoassets and blockchain technology. By establishing appropriate regulatory frameworks and fostering innovation through initiatives like the FMI sandboxes, the UK aims to position itself as a leading global hub for the blockchain industry.

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