The United Kingdom’s economic and finance ministry – HM Treasury – has strongly denied proposals by the House of Commons’ Treasury Committee to regulate cryptocurrencies like gambling.
The UK Treasury Committee had called for unbacked cryptocurrencies to be regulated like gambling in May. A panel of lawmakers noted at the time that speculation in these assets “more closely resembles gambling than it does a financial service.”
However, in a response on Thursday, Britain’s Financial Services Minister Andrew Griffith said that the Exchequer “firmly disagrees” with the lawmakers’ recommendation of treating cryptoassets as a form of gambling.
“[Treating cryptos as a form of gambling] would run completely counter to globally agreed recommendations from international organizations and standard-setting bodies, including the International Organization of Securities Commissions and the G20 Financial Stability Board.”
Griffith further said that a system of gambling regulation could fail to mitigate many critical risks such as the commingling of customer assets alleged of the failed crypto exchange FTX. It would likely not address market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices, the UK government said.
“A financial services regulatory framework is more appropriate for addressing the risks of unbacked cryptoassets and creating the conditions for safe innovation.”
The government further said that they are already working to regulate the crypto market and a proposed regulatory legislation was laid with the parliament. The legislation may come into force by the end of this year, the government added.
“HM Treasury and the FCA will work with the industry to ensure crypto firms are made fully aware of the standards required for approval at the FSMA gateway.”
UK’s Global Crypto Hub Ambitions
Though the UK government denies cryptoassets being regulated under gambling, it agrees with the Treasury Committee’s conclusion that “certain cryptoassets and the underlying technology could lead to improved efficiencies in financial markets and payments.”
It aligns with the UK’s ambitions to become a crypto hub, proposed last year by Rishi Sunak, then finance minister and now prime minister.
Additionally, the Exchequer welcomes the committee’s suggestion for a balanced approach toward supporting new innovation, including cryptoasset technologies.
“We believe that this recommendation is consistent with the current UK Government’s approach, which is principally focused on regulating cryptoasset activity, clarifying tax treatment of cryptoasset activity, and participating in certain international organizations to help shape and develop international standards and recommendations.”
That said, the government is also planning to establish Financial Market Infrastructure (FMI) sandboxes, for companies to experiment with blockchain technology, thus making the market more “efficient, resilient and transparent.”
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