The industry immediately reacted negatively to the House of Commons Treasury Committee’s opposition to the government’s plans to regulate crypto as a financial service, and the lawmakers’ views, though non-binding, may represent an additional roadblock for the U.K.’s crypto plans.
Consumers could be lulled into a false sense of security if unbacked cryptocurrencies such as bitcoin (BTC) and ether (ETH) were regulated like other investments, according to a report issued by a panel of lawmakers led by Harriet Baldwin of the Conservative Party on Wednesday. Instead, the panel recommended that unbacked cryptocurrencies be regulated as gambling.
A government spokesperson told CoinDesk that the country’s finance ministry, the Treasury, is adamant that it will move forward with its plans to regulate crypto using existing financial legislation, as crypto’s dangers are comparable.
This may prove crucial given that, in the United Kingdom, new laws are typically proposed by the government. The skepticism of legislators has not impeded the passage of other crypto regulations, including new measures on financial promotions, but many in the crypto industry view the latest intervention as counterproductive.
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The then-finance minister and current prime minister, Rishi Sunak, stated a year ago that he intended to make the United Kingdom a crypto center. Even though ministers have discreetly retracted some of the announcement’s more ostentatious elements, such as plans to mint a non-fungible token, the Treasury continues to assert that it wishes to promote innovation.
During a consultation in February, the Treasury proposed road regulations that were generally embraced by the industry; however, lobbyists are now more concerned.
“This latest Treasury Select Committee report goes against the grain,” Mark Foster, the European Union (EU) policy director for the Crypto Council for Innovation, told CoinDesk. It erroneously comprehends and misrepresents digital assets. There are practical use cases involving remittances, payments, and financial inclusion pathways.”
Director of policy at Innovate Finance, Adam Jackson, stated that the Treasury’s approach ensures quality and consistency with other jurisdictions, citing the EU’s recent enactment of crypto regulations comparable to those for other financial instruments.
Jackson stated that “financial services are rigorously regulated in the U.K., and the application and adaptation of these existing rules to crypto assets will therefore provide a high level of protection,” including protection for vulnerable consumers.
Ian Taylor, board advisor at CryptoUK, appeared to concur, stating that education and regulations can mitigate consumer risk. “Comparing cryptocurrency to gambling is both ineffective and false,” he said.
The committee’s plans diverge from the United Kingdom’s previous finance-based approach.
The country’s crypto anti-money laundering system is already administered by the Financial Conduct Authority, which also regulates traditional services such as consumer credit and payments.
The Financial Services and Markets Bill, which has already been approved by the House of Commons, the parliament’s lower house, contains additional proposed crypto regulation powers. The bill appears close to becoming law.
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Lawyer Diego Ballon Ossio told CoinDesk in an email that despite the committee’s opinions not being obligatory on the Treasury, they could still cast a wrench into the works due to parliamentary procedures.
Ossio, a partner at Clifford Chance’s London practice, stated that after the FSMB is enacted, the comprehensive law that regulates cryptocurrencies will require a vote in both houses of the British Parliament.
In theory, Sunak’s party has a majority in the House of Commons, but he has failed to persuade party members like Baldwin. According to the Institute for Government, lawmakers cannot typically amend secondary regulations, such as the recent crypto promotions amendment, and rarely deny them in actuality.
However, the committee’s opposition, while not fatal, may pose an additional political obstacle to the government’s plans.
