A recent House Finance Committee report sparked heated debate when it recommended that personal trading and investment activities in “unbacked crypto assets such as Bitcoin and Ether” be regulated as gambling.
A frustratingly common occurrence throughout the report is the government’s claim that cryptoassets are “unbacked” at a time of high fiat inflation backed only by trust in the Bank of England and the power of the military. be. For example, the phrase “unbacked crypto assets” appears 26 times in his first 20 pages of the main section of the report. However, innovative blockchain solutions such as DeFi, ReFi, yield farming, zero knowledge (ZK) and even staking were never mentioned.
The report makes the following recommendations regarding the regulation of cryptocurrencies:
- Apply blockchain-based solutions to enhance payment processing, especially in “low-income countries and cross-border transactions”.
- Establish a timely regulatory framework and streamlined approval process.
- “Supporting cryptography with distinct beneficial use cases and avoiding wasting public resources on niche innovations.”
- Consider regulating retail transactions as “unbacked crypto assets as gambling” given their price volatility and more akin to gambling than financial services.
- Apply the AML/CTF “protective measures” used by the Gambling Commission for crypto assets.
A road to zero tax on cryptocurrencies?
This regulatory change, if implemented, will fundamentally change the landscape of cryptocurrency activity in the UK and set a precedent for other jurisdictions around the world.
Members of the British Parliament have acknowledged that the country needs to encourage blockchain innovation. The UK’s inability to embrace emerging technologies has put it behind other more crypto-friendly countries such as Portugal and Dubai. Matt Hancock has said the UK should adopt a “growth maximizing perspective” when it comes to cryptocurrencies.
“HMRC takes a revenue maximizing approach … we are applying it in a sledgehammer kind of way … all we have to do is maximize growth where future revenues will be much greater It is about having the perspective of doing.”
A recent Finance Committee report was less supportive of crypto than Hancock, but surprisingly, pro-crypto lawmakers gave the option of using gambling tactics to abolish crypto taxes.
The UK has no tax on gambling. Gambling income is not declared on individual tax returns. Could gambling be a loophole for Web3 companies to move to the UK and strengthen the country’s fintech industry?
More information: Finance Committee Report
A Finance Commission report examines the potential impact of crypto assets on the financial services environment. The company acknowledges potential benefits such as “improving the efficiency and reducing costs of payments, especially for cross-border transactions and in low-income countries.” However, it also stresses that it carries “significant risks” such as price volatility, high energy consumption, fraud, fraud and use in money laundering.
“Unbacked cryptoassets have no intrinsic value, and their price fluctuations expose consumers to the potential for significant gains or losses, even though they serve no useful social purpose.”
An unflattering but highly controversial initial assessment of the cryptocurrency industry is that crypto assets within the financial services sector should be targeted to “encourage innovation, maximize profit potential” and mitigate risk. It follows a report highlighting the government’s proposal to regulate
After emphasizing the importance of not using public resources for activities that do not have clear and beneficial use cases, the report noted similarities between cryptocurrencies and gambling due to their high price volatility, suggesting similar regulatory approaches. is recommended.
cryptocurrency is gambling
The commission said its recommendation to regulate retail trading and investment activities in “unbacked crypto assets” as gambling rather than as a financial service is rooted in the “same risk, same regulatory outcome” principle.
“Therefore, we urge governments to regulate retail trading and investment activities in unbacked crypto assets as gambling and not as a financial service in accordance with the declared principle of ‘same risk, same regulatory outcome’. To do.
However, the report highlights criticism of this, saying that it can “create a halo effect, leading consumers to believe that this activity is safer or otherwise protected than it actually is.” claimed. Former FCA Chairman Charles Rundell even predicted demand for “addiction services” for cryptocurrency investors.
“Speculative cryptocurrency is gambling, pure and simple. It should be regulated and taxed as such, and so should taxes to support debt counseling and addiction services that stimulate demand.” is.”
Additionally, the “Key Issues” section of the report cites a 2022 Bank for International Settlements (BIS) study revealing that most of the new Bitcoin users are “young men under the age of 35.” I have to. The survey also highlighted the risks that this demographic, considered “the most prone to risk taking in the population,” may face.
Therefore, a recommendation to treat cryptocurrency trading as gambling could arguably make cryptocurrency trading more attractive to those forced into high-risk activities, questioning the consumer protection argument. will be thrown.
Balancing innovation and consumer protection
The report also included additional external responses to the survey, including those from the Financial Services Consumer Commission, which expressed concern over the government’s focus on developing new cryptocurrency technologies at the expense of consumer protection. expressed. Additionally, CryptoUK’s Ian Taylor argued that proper regulation would help reduce consumer risk, stating:
“There needs to be regulation of certain concentrated market participants. Perhaps some regulation might have prevented the events that have seen some of the very poor business practices that have happened recently.”
Taylor continued to criticize the commission in a statement after the report was released.
The challenge in finding equitable solutions to cryptocurrency regulation is striking the right balance between fostering innovation and protecting consumers. The report may be overly critical of the crypto sector, but it repeats the government’s approach outlined by Rishi Sunak.
“Making the UK a global hub for cryptocurrency technology, and the measures we have outlined today, will help ensure businesses can invest, innovate and scale in the country.”
Government legislators are looking to introduce crypto assets into the framework of the Financial Services Market Act of 2000 (FSMA), which governs a range of financial services.
However, the report seeks to set back new innovations and instead focus on mitigating the “significant risks cryptocurrencies pose to consumers and the environment.” [which] It’s real and it exists. ”
The report has kicked off an interesting debate over cryptocurrency tax and regulation in the UK, but the Treasury Committee has not changed its anti-crypto stance.
“Our predecessor, the Commission, released a report in 2018 calling for greater regulation to protect consumers from an industry described as the ‘wild west. Nothing we’ve heard in the current survey changes that impression. ”
The post Everything You Need To Know About Regulating Cryptocurrencies As Gambling In The UK first appeared on CryptoSlate.