Tech
Cryptocurrency: Treat investing as gambling, say MPs
- By Chris Vallance and Tom Gerken
- Technology reporters
May 17, 2023
Updated May 17, 2023
Image source, Getty Images
MPs have urged the Government to treat retail investments in cryptocurrencies such as Bitcoin as a form of gambling.
Their value could change dramatically and consumers would risk losing their entire investment, features that closely resemble gambling, the Treasury Select Committee has found.
He also criticized the Royal Mint’s abandoned plans to create a non-fungible token (NFT).
The Treasury told BBC News it did not support the use of gambling regulation.
The risks posed by cryptocurrencies were “typical of those that exist in traditional financial services and it is the regulation of financial services – rather than the regulation of gambling – that has the proven ability to mitigate them,” an official told BBC News of the Treasury.
‘Losing everything’
The committee said “unsecured” cryptocurrencies – typically cryptocurrencies with no fixed value – expose “consumers to the potential for substantial gains or losses, without serving any useful social purpose.”
“These features resemble gambling more than a financial service,” the deputies added.
The charity GamCare told the BBC that, over the past two years, it has heard from more than 300 people who said they were struggling to invest in cryptocurrencies and other forms of online financial markets.
Research cited by lawmakers found that 40% of new Bitcoin users were men under 35, commonly identified as the most risk-taking segment of the population.
Castle Craig, a rehab clinic specializing in treating people with addictions, connected us with a young man who had lost a lot with cryptocurrencies.
The former gambling addict told BBC News that although he had given up gambling, he had turned to cryptocurrencies.
“In my head, I just thought this wasn’t gambling, it was just an investment, but it clearly wasn’t,” he said.
He said he had lost around £150,000 investing in cryptocurrencies, including borrowed money, and that checking his phone to see how the market had moved had become an obsession. “There was no interruption, I was just sitting on the phone looking at it constantly and I couldn’t sleep,” she recalled.
He said he supports the committee’s approach. “Cryptocurrencies are a game of chance,” she said. “You can lose everything you have.”
Image source, Getty Images
Former sports minister and gambling campaigner, Conservative MP Tracey Crouch, welcomed the report.
“Right now, cryptocurrencies look like a Wild West town without a sheriff,” he said.
“However, I am sure that, if given the right resources, the Gambling Commission could bring some order to this complex, risky and often confusing area which has unwittingly sucked consumers in by advertising through sports such as football, giving a false impression to fans and others who are safe and protected.”
Cryptocurrency sponsorship is now widespread among football clubs, but the Premier League recently decided to end gambling sponsorship on the front of their shirts from the start of the 2026 season. a voluntary move and not required by law.
The report provides few details on what gambling regulation applied to cryptocurrencies might mean. Congresswoman Harriett Baldwin, the committee’s chair, said the report recommended that “the kind of speculative enticement of people to buy particular cryptocurrencies” be treated like gambling.
He said the committee had heard plenty of evidence of how “football clubs are using this as a way to extract money from their loyal supporters”.
“Fun investment”
In February, the government asked people to comment on proposals for the financial regulation of cryptocurrencies.
But the committee said the government wants to regulate cryptocurrencies because financial services would create the false impression that they are as safe as traditional investments – a “halo effect… leading consumers to believe this activity is safer than it is be or protected when it is not”.
The committee’s report found that surveys suggest that around one in 10 people in the UK hold crypto assets, with the majority investing in cryptocurrencies such as Bitcoin and Ethereum.
The most mentioned reason for holding crypto assets was that they were a “fun investment.”
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Global hub
Cryptocurrencies are just one type of asset. More generally, MPs said that while they support innovation, the potential benefits of cryptocurrency-related technologies remain uncertain.
“Meanwhile, the risks posed by cryptocurrencies to consumers and the environment are real and present.”
The government is excited about the potential of cryptocurrencies. While Chancellor, Rishi Sunak announced his ambition to make the UK a global hub for technology.
The Treasury believes cryptocurrencies offer opportunities, but said it is “vigorously regulating the market, addressing the most pressing risks first in a way that promotes innovation.”
CryptoUK’s Ian Taylor said the financial sector is embracing cryptocurrencies: “Professional investment managers see Bitcoin and other crypto assets as a new alternative investment class – not as a form of gambling – and institutional adoption of unsecured crypto assets has increased significantly.”
Recognizing the potential risks and benefits, the committee recommended a balanced approach, but advised the government to avoid spending public resources on projects without a clear beneficial use.
“The government’s recent foray into seeking (and subsequently abandoning) production of a non-fungible Royal Mint token is a case in point,” the MPs wrote.
“It is not the government’s job to promote particular technological innovations for their own sake.”
NFTs are “one-of-a-kind” digital assets that can be bought and sold like any other asset – they are often associated with digital images.
The committee will review central bank digital currencies in a separate report.