The UK Government has turned down a House of Commons committee’s proposal to regulate crypto investment as gambling.
The UK is exploring crypto regulation in a phased approach this year, and there are various suggestions about how the asset class should be regulated.
Gambling Regulations Could Not Deal With Risk Factors That Led to FTX Demise
The seventh special report of the session 2022-23 mentions a letter that Andrew Griffith, Economic Secretary to the Treasury, wrote to Harriett Baldwin, the Chair of the Treasury Select Committee.
Griffith strongly disagreed with the proposal to regulate “retail trading and investment activity in unbacked cryptoassets as gambling rather than as a financial service.” He explained that gambling regulations could not deal with the risk factors that led to FTX’s collapse.
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Moreover, the letter mentions that issues such as insider trading, market manipulation, and predatory short selling are present in both the traditional and crypto markets.
The government also feels that treating crypto investment as gambling would clash with other jurisdictions and Financial Stability Board’s approach to regulating the asset class.
Griffith wrote:
The Committee’s proposed approach would therefore risk creating misalignment with international standards and approaches from other major jurisdictions including the EU, and potentially create unclear and overlapping mandates between financial regulators and the Gambling Commission.
The letter is a response to the UK’s House of Commons Committee’s recommendation of classifying unbacked crypto assets as gambling.
Last month, the UK passed a bill recognizing crypto as regulated financial activity. The country is also setting strict rules for crypto advertising, and non-compliance may invite penalties that include imprisonment.
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