Ladies and Gentlemen, it appears our dear government has decided to bring down the hammer on cryptocurrencies. In its infinite wisdom, it has concluded that retail trading and investment in unbacked crypto assets ought to be classified as gambling. Yes, you read that right: Gambling.
The House of Commons Treasury Committee has whipped up a report arguing that cryptocurrencies, subject to severe price volatility and devoid of intrinsic value, contribute no discernible social good. Their submission comes laced with a side-serving of the Financial Conduct Authority’s (FCA) written evidence, pointing out a rise in crypto gambling addictions. A worrying trend indeed, one that undoubtedly requires urgent attention. Yet, labelling the entire crypto space as a cesspit of compulsive betting strikes me as a tad too simplistic.
According to our beloved Treasury Committee, around 10% of UK adults have dipped their toes into the crypto world. The increasing interaction with crypto assets is hence bound to elevate associated risks. But here’s the kicker – equating it to gambling. Now that’s a new one! Even our friend Charles Randall, ex-chairman of the FCA, isn’t shy to call speculative crypto “gambling, pure and simple.”
Well, Mr. Randall, have you ever pondered upon the nature of ‘betting’ when investing in stocks or traditional assets? Most stock picks are estimations, very well-made estimations but estimations none the less. ‘Past performance does not guarantee future results – capital is at risk’. How different is that from crypto trading? The crypto enthusiasts do their homework too. People are lucky, betting on the wrong or right meme coin or protocol to go up, but they are not playing roulette where any number is equally valuable and a game of chance. From Twitter activity to Telegram group size – people research, put thought into it, and similarly to our friends from the traditional markets, try to use their network to pick up pieces of information which a competitive advantage just shy of insider trading.
However, there’s a ray of hope in this bleak scenario. The International Organization of Securities Commissions (IOSCO), a global watchdog, is advocating for the UK to regulate crypto as it does stocks and bonds. Now, that’s a suggestion worth its salt, in my humble opinion. This recommendation underscores the importance of trading platforms disclosing their vetting process for crypto assets, safeguarding clients’ crypto assets, and ensuring these assets don’t mingle with the firm’s own trading reserves. Isn’t this the level playing field we’ve been clamouring for?
And yet, the Treasury select committee seems to be chasing a different hare. They’re singing the ‘crypto-as-gambling’ tune, warning that treating crypto like a traditional financial asset and regulating it via the FCA risked creating a “halo effect” that could lead consumers to believe the industry was “safer than it is” or that they were protected from financial losses, when they were not.
Before we buy into this fear-mongering, let’s remember that our current inflation rate stands at a staggering 6.2%, the highest since February 1992 (according to the Office for National Statistics). Seems like your savings account is also not as safe as thought, or protecting you from financial losses due to inflation. And what about our dear old banks, like Silicon Valley Bank and Credit Suisse, already collapsed? Are these traditional financial institutions truly the safe havens we’re led to believe?
Crypto is indeed volatile and risky, I won’t contest that. But classifying it as gambling? The powers that be couldn’t have better advertised their ignorance about the very thing they’re trying to regulate. Matthew Long, the director of digital assets at the FCA, seems to understand the importance of international coordination in addressing these risks. Yet, our government’s final decision on cryptocurrency regulation is still up in the air.
So, while the Treasury Committee is busy waffling about gambling and the FCA is preparing to tackle misleading crypto ads, I can’t help but wonder: Are we just rearranging deck chairs on the Titanic here? Perhaps it’s high time we stopped equating crypto with gambling and started treating it for what it truly is – a revolutionary financial tool that deserves proper regulation. But then again, who am I to suggest? I’m just here for the memes. 💰