UK Regulators Split Over Whether to Classify Crypto as Gambling or Stocks

UK Regulators Split Over Whether to Classify Crypto as Gambling or Stocks

The UK government has promised to be friendly towards crypto as it receives advice from different sectors, with the International Organization of Securities Commissions urging the country to regulate crypto the same way it would traditional assets, like stocks, in an attempt to gain clear and concise global regulation of the space.

  • As the United Kingdom builds its cryptocurrency framework, it is getting many of different advice.
  • MPs feel that cryptocurrency is akin to gambling; others liken it to stocks.
  • Either way, the United Kingdom has promised to be friendly to cryptocurrency, even if it’s viewed as a gamble. 

The United Kingdom Government has made promises to be friendly in its approach to cryptocurrency regulation. Still, as it mulls over a framework, it is given plenty of advice from different sectors. 

Following advice from parliament’s Treasury committee that cryptocurrency should be treated like gambling by United Kingdom regulatory authorities, a worldwide markets watchdog has urged the United Kingdom to regulate cryptocurrency the same way it would traditional assets, like stocks. 

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The International Organization of Securities Commissions (Iosco), of which the UK’s Financial Conduct Authority (FCA) and the U.S.’s SEC are members, stated its members should regulate this new digital investment space in ways that “are the same as, or consistent with, those that are required in traditional financial markets.”

Clear and Concise Regulations

Iosco’s recommendation to treat cryptocurrencies like stocks and bonds seems to be an effort  to win clear and concise worldwide regulation of the space. There are different approaches, frameworks, and stances on cryptocurrency, which Iosco feels could lead to regulatory arbitrage – a practice in which enterprises benefit from loopholes in numerous countries’ regulations.

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Rather, Iosco would have it so platforms of trading have to publicly disclose how they assess cryptocurrency coins and crypto tokens before offering them for trading. These platforms would have to clearly explain how they store and safeguard clients’ cryptocurrency and likewise prove assets are separated from the exchange’s own assets – as was the  challenge with FTX. 

Varying Approaches

Although while Iosco’s approach appears more in line with the general usage of numerous cryptocurrencies – using them as financing vehicles – British MPs view trading in cryptocurrencies as akin to gambling. 

MPs on the Treasury select committee worry that cryptocurrency trading, like gambling, can be addictive. Furthermore, they believe that investors ‘betting’ on the price of unbacked coins and crypto tokens could lead to substantial financial losses. 

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The MPs are likewise worried that if the FCA were to take cryptocurrencies under their jurisdiction, it would lead investors to believe the industry was “safer than it is” or that they were protected from financial losses.

The other side

  • The United Kingdom Government is very likely place that responsibility of regulating cryptocurrency with the FCA, which as of now ensures enterprises comply with money-laundering regulations. If this is the case, the FCA will probably regulate cryptocurrencies with a hybrid approach.

Why This Matters

The direction regulatory authorities take in regulating cryptocurrencies will undoubtedly impact how the sector operates in the United Kingdom. Nonetheless, the Government is determined to empower innovation and allow these digital assets to flourish – but will they thrive like stocks, or like betting shops? 

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Read more about recent gambling reforms in the UK:

Cryptocurrency Assets Unscathed in UK’s New Gambling Reforms

Read more about Hong Kong’s cryptocurrency rules:

Cryptocurrency Investors Can Trade Under New Hong Kong Regulations from June 1st


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