UK Lawmakers Clash Over Government Plans to Regulate Crypto as Financial Services

U.K. lawmakers appear to be divided on how crypto should be treated by the country's regulators. While some are suggesting crypto is akin to gambling, others support the government’s efforts to bring digital assets into the scope of existing financial services regulation.

Last month, the House of Commons Treasury Select Committee – made up of 11 members of Parliament – recommended that crypto should be treated like gambling “because it has no intrinsic value and huge price volatility.” The suggestion was met with instant industry backlash, and more recently opposed by other lawmakers.

An All Party Parliamentary Group (APPG) for crypto assets, made up of 15 members of Parliament and Lords (from the upper chamber), released its own report on Monday, which backed the government’s proposal to treat crypto as regulated financial services.

“The APPG supports the position of HM Treasury that cryptocurrency and digital assets are best regulated, in so far as is possible and appropriate, within existing and new financial services regulations, which has a track record in mitigating risks to consumers and investors,” the report said.

Read more: UK Lawmakers Call for a Dedicated Government Role to Oversee Crypto Regulation

At an event marking the publication of the APPG crypto report on Monday, Chair Lisa Cameron listed some reasons why it supports the government's position to treat crypto as financial services – chief among them being tax collection.

“I like people to pay tax when they make gains in the U.K. and it's very important that that's harnessed and that can only be achieved under the financial services regulation rather than gambling,” Cameron said.

Winnings from gambling are not taxed, whereas gains on investments usually are, Diego Ballon Ossio, a partner at law firm Clifford Chance’s London practice told CoinDesk in a statement.

The other reason crypto should be treated like a financial service is so that the U.K. has commonalities with other jurisdictions when it comes to their financial services regulations, Cameron said.

Although global standard-setters are working on norms for crypto, individual jurisdictions have largely differed on their approach to regulating the sector. The U.K.’s immediate neighbor, the European Union, recently sealed the text on a bespoke regime for crypto asset regulation, while the U.S. Securities and Exchange Commission has taken a series of enforcement actions arguing a range of crypto assets qualify as securities.

Cameron said the U.K.’s financial services regulations offer the best and most robust protections possible for local consumers.

“Risks posed by crypto are typical of those that exist in traditional financial services and it’s financial services regulation – rather than gambling regulation – that has the track record in mitigating them,“ a spokesperson for the finance ministry said in an emailed statement to CoinDesk.

The U.K. government has said it wants to bring forward specific crypto regulations in phases. The first step includes passing the new Financial Services and Markets Bill that is set to give multiple regulators more powers to supervise crypto.

After the bill passes, the detailed laws that bring crypto into the regulatory fold would need to be agreed on by both houses of Parliament, Ballon Ossio told CoinDesk last month.

Read more: UK Lawmakers' Bid to Regulate Crypto as Gambling Could Be a Political Problem, Invites Industry Wrath