In a rebuttal to a recent British parliamentary report equating cryptocurrency to gambling, both CryptoUK, a self-regulatory organization, and crypto exchange platform Kraken have issued strong responses.
The crypto industry stakeholders argue against the lawmakers’ recommendation, marking a fascinating chapter in the ongoing crypto debate in the United Kingdom.
UK lawmakers’ concerns and recommendations
A House of Commons Treasury Committee report, dated May 17, suggested treating unbacked cryptocurrencies akin to gambling, due to significant consumer risks tied to such assets.
The lawmakers’ concerns stemmed from factors like price volatility and a perceived lack of intrinsic value in cryptocurrencies. The committee concluded that identical risks should yield similar regulatory outcomes, hence the crypto-gambling parallel.
This recommendation has, however, been met with strong opposition from the local crypto community, especially considering the UK’s potential to become a significant player in the global crypto landscape.
The industry’s counter argument
In a statement, CryptoUK argued that the proposed approach failed to consider the nuanced nature of the crypto sector and the economic growth potential it presents for the United Kingdom.
The organization pointed out the absence of such regulatory models globally and the need for a custom approach to crypto regulation, akin to the EU’s Markets in Crypto-assets (MiCA) framework. They warned that the committee’s approach risked making the UK a hostile environment for crypto businesses.
CryptoUK further cautioned that the committee’s proposed approach might push UK consumers to offshore crypto platforms, undermining the very objective of consumer protection via regulation.
Kraken, on the other hand, fundamentally disagreed with the committee’s assumption that cryptocurrencies lack intrinsic value. The firm regretted the committee’s dismissal of the UK’s potential to emerge as a global leader in the rapidly developing crypto industry.
Kraken further stated that equating crypto assets with gambling products was misguided and wholly unsuitable for the country’s consumers. They argued that such a comparison not only overlooked the purpose and potential of crypto technology, but also noted that gambling protections don’t offer the same safeguards as financial services regulations.
An interesting point raised by CryptoUK pertains to the potential loss of capital gains tax, should crypto trading be seen as gambling, which is exempt from this form of taxation.
They questioned whether the United Kingdom government would be willing to forego a significant tax income derived from the buying and selling of unbacked crypto assets.
While the Treasury hasn’t defined the extent to which crypto would be regulated “as gambling,” the report called for stringent regulation and guidelines around consumer protection, Anti-Money Laundering (AML), and terrorism financing.
The backlash to the UK Treasury Committee’s report underlines the crypto community’s determination to defend the sector’s legitimacy. It also highlights the need for comprehensive, nuanced, and forward-thinking regulation that acknowledges the unique properties of cryptocurrencies and their potential economic value.