July 7, 2024

UK Govt calls for crypto trading to be regulated as gambling

The UK House of Commons Treasury Committee has published a call to regulate cryptocurrency trading in the country. In a statement issued, the committee stated that crypto trading was dangerous and speculative, warranting the same degree of regulation as gambling activities at UK online casinos. This idea elicited a variety of views from stakeholders and the industry, with some encouraging the demand for laws to protect consumers and others concerned about possible stifling of innovation.

Here we take a look at what this potential move could mean for gambling in the UK. We also examine how this could affect key stakeholders in the crypto sector if implemented.

What would this move mean for the current gambling legislation

If the UK Government chooses to regulate cryptocurrency trading as gambling, crypto exchanges would be treated similarly to regulated, licenced, top-rated UK online casinos. This would imply that cryptocurrency exchanges would be subject to the same laws. The following would be the consequences of such a move.

Anti-Money Laundering and User Identification

To authenticate the identities of consumers, cryptocurrency exchanges would be forced to employ sophisticated client identification methods.

Safeguards for Responsible Gambling

Responsible gambling precautions would need to be established through crypto exchanges by rules enforced to present players with endless benefits at the best-rated UK online casinos. This might include putting restrictions on consumers’ daily deposits or losses, as well as preventing individuals from participating in excessive or dangerous trading practices.

The mixed reaction to the legislation proposal

The proposal to regulate cryptocurrency trading has had conflicting responses. Below we investigate various points of view.

Those in support of the regulation believe that it would shield UK citizens from the intrinsic risks of cryptocurrency trading. Andrew Griffith, the UK Financial Services Minister voiced that if crypto assets were treated as a form of gambling, it could put Britain at odds with the European Union and global regulators while failing to mitigate risks.

Regulation opponents, meanwhile, are concerned that excessive legislation would inhibit innovation in the crypto sector. They claim that adopting tight laws would stifle the development of innovative technology and the growth of cryptocurrency-related enterprises. The worry with lawmakers in treating the crypto sector as a financial service was that it could be seen by consumers as a much safer option than it is. Critics underline the necessity of encouraging innovation and creating a welcoming atmosphere for crypto companies and entrepreneurs.

Another view included the possible scenario that crypto trading could be regulated by the FCA and in such an instant, it would be subject to crypto restrictions like those imposed on other financial services businesses. Regulations would include liquidity management, capital sufficiency, and company behaviour guidelines. Crypto exchanges would need to set aside adequate capital to cover potential losses to ensure stability. Another requirement would also include a strong liquidity management system to ensure prompt customer withdrawals.  

Corporate behaviour guidelines would need to be in place to ensure that players at top-rated UK online casinos were open to fairness and consumer protection. In addition, such procedures would need to include price information to avoid market manipulation.

Background of Gambling and Crypto in the UK

The UK Gambling Commission oversees and controls all forms of gambling in the country and has no specific laws or regulations in place regarding cryptocurrency use. The best-rated online casinos UK that have been supporting cryptocurrency gambling require an operator license and notifying the UKGC of any supported payment methods. While cryptocurrency trading is not classed by the UK Gambling Act as gambling, crypto investors are required to report gains from crypto on tax returns.

Established in 2007, under the 2005 Gambling Act, the UK Gambling Commission took over regulating bingo, lotteries, casinos, betting, slot machines, and arcades from Great Britain’s Gaming Board. The Gambling Commission is responsible for issuing licenses to land-based and online gambling operators and has the power to revoke licences or issue fines, as well as prosecuting and investing illegal gambling. It constantly updates the regulations to ensure a safe and responsible online experience for players. In fact, the latest update regarding remote customer interaction was released in August and becomes effective from the end of October 2023.

Most authorities and jurisdictions still need to enact cryptocurrency governing laws, which means the legality of crypto mining in most countries remains unclear. In Great Britain, the Cryptoassets Taskforce was established in 2018, consisting of Her Majesty’s Treasury, the FCA, and the Bank of England. The main task of the Cryptoassets Taskforce is to examine and determine how and when cryptoassets should be regulated.

Early in 2020, the FCA was also charged with stepping in as the Counter Terrorist Financing and Anti Money Laundering supervisor over organizations carrying out cryptocurrency ventures. In October 2020, the distribution, marketing and selling of crypto derivatives were banned by the FCA, estimating that retail consumers would save approximately £53 million due to the ban. In April 2021, the BoE-Treasury taskforce was created to explore the possibility of a digital pound, which could be called Britcoin instead of Bitcoin.

Conclusion

Where there is smoke, there’s fire. Changes in the UK seem inevitable in the future as the government continues to evaluate recommendations from the committee regarding legislation of cryptocurrencies. Aside from the above regularity suggestions, the UK Government is also expected to explore other steps such as mandating exchanges and taxation of crypto trading. The decisions by the government regarding crypto regulations could have a huge impact on the crypto industry’s future in the country. A fully regulated industry like online gambling could hold great benefits for both and attract more clientele with effective regulations to ensure a fair and safe environment for all.