MPs have called on the government to categorize retail investment in cryptocurrencies like Bitcoin as a type of gambling, emphasizing that their volatile nature could lead to substantial value fluctuations and the potential loss of entire investments.
According to the Treasury Select Committee, these characteristics closely resemble those of gambling. Furthermore, the committee criticized the abandoned proposal for the Royal Mint to develop a non-fungible token (NFT). In response, the Treasury informed BBC News that it does not endorse the application of gambling regulations.
It argued that the risks associated with cryptocurrencies are comparable to those found in traditional financial services, and therefore, financial-services regulation, rather than gambling regulation, has proven effective in mitigating such risks.
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The committee expressed concerns regarding "unbacked" crypto assets, which typically refer to cryptocurrencies lacking a fixed value. According to the MPs, these assets expose consumers to significant potential gains or losses while serving no meaningful social purpose.
They emphasized that these characteristics bear a closer resemblance to gambling rather than financial services. Over the past two years, the committee has received feedback from more than 300 individuals who have encountered difficulties with investing in cryptocurrencies and other online financial markets.
Research cited by the MPs highlighted that 40% of new Bitcoin users were men under the age of 35, a demographic often associated with a higher propensity for risk-taking. Castle Craig, a rehabilitation clinic specializing in addiction treatment, connected us with a young man who experienced substantial losses in the crypto market.
Although he had previously overcome a gambling addiction, he admitted turning to crypto investments, initially perceiving it as an investment rather than gambling. Unfortunately, he ended up losing approximately £150,000, including borrowed funds, and developed an obsessive routine of constantly monitoring the market on his phone, resulting in sleep deprivation. Reflecting on his experience, he supported the committee's perspective, asserting that crypto activities are akin to gambling, as they carry the risk of losing everything one possesses.
The report received support from Tracey Crouch, a Conservative MP, former sports minister, and advocate for gambling regulation. Crouch likened the current state of the crypto market to a lawless frontier, lacking proper oversight.
She suggested that with adequate resources, the Gambling Commission could bring order to this complex, risky, and often confusing realm. Crouch highlighted that crypto has inadvertently attracted consumers by leveraging marketing strategies tied to sports like football, creating an illusion of safety and protection.
Cryptocurrency sponsorships have been prevalent among football clubs, although Premier League clubs recently agreed, on a voluntary basis, to cease gambling sponsorships on the front of their shirts starting from the 2026 season. This decision was not mandated by regulations.
The report does not provide extensive details on how gambling regulation could be applied to crypto. MP Harriett Baldwin, the chairwoman of the committee, mentioned that the report recommended treating the speculative enticement of individuals to purchase specific cryptocurrencies as a form of gambling. She noted that the committee had received substantial evidence regarding how football clubs utilize these tactics to extract funds from their loyal supporters.
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In February, the government sought public input on its proposals for regulating crypto assets within the financial sector. However, the committee expressed concerns that the government's plan to treat cryptocurrencies as financial services could mislead consumers into believing they are as secure as traditional investments, creating a deceptive "halo effect." This could give individuals a false sense of safety and protection in an area that lacks adequate safeguards.
The committee's report highlighted survey results indicating that approximately one in ten people in the UK currently hold crypto assets, with most investments focused on cryptocurrencies such as Bitcoin and Ethereum. Among the reasons cited for holding these assets, the most commonly mentioned motive was the perception of them being a "fun investment."
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MPs acknowledged that while they supported innovation, the potential benefits of crypto-asset technologies remained uncertain. They emphasized that, in the interim, the risks posed by crypto assets to consumers and the environment are real and immediate.
The government has expressed enthusiasm for the potential of cryptocurrencies, with former Chancellor Rishi Sunak announcing his ambition to establish the UK as a global hub for this technology. The Treasury believes that cryptocurrencies offer opportunities but stated that it is taking a robust approach to regulating the market, prioritizing the addressing of the most urgent risks while fostering innovation.
Recognizing both the potential risks and rewards associated with crypto assets, the committee recommended a balanced approach. They advised the government to refrain from allocating public resources to projects that lack a clear beneficial use. The MPs specifically highlighted the government's recent exploration and subsequent abandonment of the production of a Royal Mint non-fungible token (NFT) as an example. They asserted that it is not the government's role to promote specific technological innovations purely for the sake of innovation.
NFTs are unique digital assets that can be bought and sold, often associated with digital images. The committee plans to examine central bank digital currencies in a separate report, indicating their ongoing scrutiny of digital financial innovations.
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