Bitcoin, ether, and other cryptocurrencies should be regulated as gambling because they may be used by fraudsters and pose considerable risks to consumers, according to a panel of UK legislators in a study released on Wednesday.
Britain is developing its first cryptoasset regulations, which will only include anti-money laundering measures.
According to the research from parliament's treasury committee, bitcoin and ether account for two-thirds of all cryptoassets and are not backed by any currency or asset, resulting in price volatility and the possibility of losing all money invested in them.
Retail trading and investing in unbacked cryptocurrencies may produce a 'halo' effect, leading consumers to believe the activity is safer than it is, or protected when it is not, according to the report.
“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’,” the report said.
The Financial Conduct Authority has regularly cautioned consumers that they risk lose all of their cryptocurrency investments.
Cryptoassets have a total market capitalization of roughly $1.2 trillion globally, making them a minor element of the financial system, but the collapse of crypto company FTX exchange last year increased the urgency of regulating the sector.
"The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a wild west," Harriett Baldwin, chair of the treasury committee, stated.
According to official statistics, 10% of UK citizens own or have previously owned cryptoassets.
On Tuesday, the European Union approved the world's first complete set of rules for crypto markets. International regulators are expected to establish worldwide standards soon.
According to the analysis, the underlying technology employed by cryptoassets has the potential to improve payment efficiency.
By fLEXI tEAM