The United Kingdom has grand aspirations of becoming a digital assets hub, just as London already is for traditional finance.
However, those plans are being thwarted by watchdogs and policymakers who want to take a heavy-handed approach to regulation.
On May 17, it was reported that a panel of UK lawmakers said crypto assets should be regulated as gambling “given they are potentially used by fraudsters and pose significant risks to consumers.”
The report from Parliament’s Treasury Committee added that cryptocurrencies are not backed by any currency or asset. This leads to “volatility in prices and the potential for all money invested in them to be wiped out,” according to Reuters.
It is a similar stance to that taken in the United States, where a number of policymakers have labeled digital assets as everything from ‘shadow banking’ to ‘casino chips.’
The UK Treasury Committee said regulating retail trading and investment in unbacked cryptocurrencies could create a ‘halo’ effect. This could lead to consumers thinking the activity is safer than it is or that they’re protected when they’re not.
“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’.”
Harriett Baldwin, chair of the Treasury Committee, labeled the industry a “wild west.” She said the events of 2022 highlighted the risks posed to consumers.
In April, economic secretary to the UK Treasury, Andrew Griffith, said that crypto regulations will be rolled out within the next 12 months.
Prime Minister Rishi Sunak is keen to promote the country as a crypto hub but is facing a lot of resistance from the Treasury and Central Bank.
Bank of England Governor, Andrew Bailey, has repeatedly argued that Bitcoin and its brethren have “no intrinsic value.” UK banks are also increasingly refusing to work with crypto companies and putting up barriers for their customers.