Crypto Treated Like Gambling or Stocks? UK Regulators Divided

UK Mps feel trading crypto is as addictive as gambling.

Man in suit looking confused or doesn't know something. Casino in the background covered by transparent UK flag.
Created by Gabor Kovacs from DailyCoin
  • As the UK builds its crypto framework, it is getting a lot of different advice.
  • MPs feel that crypto is akin to gambling; others liken it to stocks.
  • Either way, the UK has promised to be friendly to crypto, even if itโ€™s viewed as a gamble. 

The UK government has made promises to be friendly in its approach to crypto regulation. Still, as it mulls over a framework, it is given plenty of advice from different sectors.ย 

Following advice from parliamentโ€™s Treasury committee that crypto should be treated like gambling by UK regulators, a global markets watchdog has urged the UK to regulate crypto the same way it would traditional assets, like stocks. 

Sponsored

The International Organization of Securities Commissions (Iosco), of which the UKโ€™s Financial Conduct Authority (FCA) and the U.S.โ€™s SEC are members, said its members should regulate this new digital asset space in ways that โ€œare the same as, or consistent with, those that are required in traditional financial markets.โ€

Clear and Concise Rules

Ioscoโ€™s recommendation to treat cryptos like stocks and bonds appears to be an attempt to gain clear and concise global regulation of the space. There are different approaches, frameworks, and stances on crypto, which Iosco feels could lead to regulatory arbitrage โ€“ a practice in which businesses take advantage of loopholes in various countriesโ€™ regulations.

Rather, Iosco would have it so trading platforms have to publicly disclose how they assess crypto coins and tokens before offering them for trading. These platforms would have to clearly explain how they store and safeguard clientsโ€™ crypto and also prove assets are separated from the exchangeโ€™s own assets โ€“ as was the issue with FTX.ย 

Varying Approaches

While Ioscoโ€™s approach appears more in line with the general usage of many cryptos โ€“ using them as investment vehicles โ€“ British MPs view trading in cryptos as akin to gambling

MPs on the Treasury select committee worry that crypto trading, like gambling, can be addictive. Furthermore, they believe that investors โ€˜bettingโ€™ on the price of unbacked coins and tokens could lead to massive financial losses. 

The MPs are also worried that if the FCA were to take cryptos under their jurisdiction, it would lead investors to believe the industry was โ€œsafer than it isโ€ or that they were protected from financial losses.

On the Flipside

  • The UK government is likely to place that responsibility of regulating crypto with the FCA, which currently ensures businesses comply with money-laundering rules. If this is the case, the FCA will probably regulate cryptos with a hybrid approach.

Why This Matters

The direction regulators take in regulating cryptos will undoubtedly impact how the sector operates in the UK. However, the government is determined to empower innovation and allow these digital assets to flourish โ€“ but will they thrive like stocks, or like betting shops?ย 

Read more about recent gambling reforms in the UK:

Crypto Assets Unscathed in UKโ€™s New Gambling Reforms

Read more about Hong Kongโ€™s crypto rules:

Crypto Investors Can Trade Under New Hong Kong Rules from June 1st

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Darryn Pollock

Darryn Pollock is a South African-born, UK-based journalist and content writer for DailyCoin with a focus on regulation and legislation revolving around the cryptocurrency space. He has covered the evolving crypto regulatory space, and examined how the US has approached law-making to offer protection in the growth of innovation. Darryn values traditional journalistic principles of truth, accuracy, independence, fairness, and impartiality, and has a Bachelor of Arts degree in Journalism and Law from Rhodes University in South Africa.

Read more