Crypto Should Be Regulated as Gambling: Key Arguments
The Treasury Committee of the United Kingdom is advocating for the regulation of cryptocurrency trading akin to gambling. A new report from the bipartisan committee of deputies emphasizes that cryptocurrencies don’t serve any useful social functions. They require a significant amount of energy to produce and their usage is closely linked to fraud and money laundering.
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Cryptotrading – nothing more than a gamble
The respective Treasury verdict was preceded by an exhaustive investigation. Spanning several months, this investigation was supplemented by surveys from numerous experienced experts and (un)biased witnesses.
Charles Randell, the Chairperson of the Financial Conduct Authority (FCA) in the UK, was among the first to suggest that speculative cryptocurrencies are a form of pure gambling. Thus, they should be subjected to corresponding regulations and taxes.
Economist Dr. Diarmid Weir, on the other hand, believes that people involved in any form of cryptocurrency activities – miners, holders, and traders – are essentially gamblers. The only individuals profiting are scammers and insiders. They exploit TradeFi and the environment, depriving cryptocurrency enthusiasts of their opportunities and wealth.
In the UK, gambling is managed by the Gambling Commission, in accordance with the 2005 Gambling Act. It provides advice and recommendations to individuals and companies and implements protective measures such as Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT). Establishments regulated by the Commission include bingo halls, lotteries, slot machines, betting offices, online bookmakers and exchanges, as well as casinos. Soon, this list may expand to include cryptocurrency exchanges and NFT marketplaces.
Crypto enthusiast – essentially a tech-savvy gambling addict
These discussions have laid the groundwork for the concept that the crypto industry should provide financial support to services advising crypto enthusiasts on debt repayment. Businesses capable of assisting with crypto dependency also require financing from industry enterprises.
Just like gambling, dealing in crypto assets can become addictive. The FCA has reported that “crypto gambling addictions are rising and there are limited controls in place to protect vulnerable consumers”.
FCA CEO Nikhil Rathi clarified that the journey typically starts with relatively small amounts. When people see that crypto can indeed generate profits, they tend to invest more and more, thereby acquiring a taste for it.
You need to be ready to lose all your money if you go down this route,
warns Mr. Rathi.
And here's a twist – it appears that the British authorities are not stopping at the crypto sector. During the investigation, even football came under their close scrutiny. As reported by Joey D’Urso, a journalist for sports publication The Athletic, the matter of betting on football match outcomes is being meticulously examined. A ban on sponsorship is not ruled out in the future. However, according to D’Urso, football fans' gambling enthusiasm has reached its zenith. It would have escalated further if (interesting to note!) crypto hadn't attracted the most impressionable gamblers.
Authorities should not aid the crypto industry
Another striking conclusion of these investigations is a recommendation for the government to consider support for the cryptocurrency sector with prudence. Dr. Larisa Yarovaya, Associate Professor of Finance at the University of Southampton, went a step further and challenged the essence of blockchain technology itself. “The Government should stop believing the myths of ‘ground-breaking’ features of blockchain technology. It is simply another way to record and store information based on ideas that had already emerged in the 1980s, which became possible to fulfill in the last decade thanks to the increase in computer power,” the scholar conclusively argued.
Moreover, the Treasury Committee highlighted that it's not the government's role to promote technological innovations just for their own sake. State resources should not be allocated for the advancement of crypto projects without a clear and beneficial application. The Committee possibly hinted at the recent NFT initiative of the Royal Mint. Last year, it demonstrated a “forward-looking approach that the government is aspiring to adopt in relation to crypto assets in the UK.” Today, these “royal” NFTs are perceived as a misuse of budget funds, heightening the risk of developing a gambling addiction among unsuspecting Britons.
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