Recent events have sparked a fast pushback from both the cryptocurrency sector and MPs in response to the House of Commons Treasury Committee’s position against the government’s plan to regulate cryptocurrencies as financial services. The committee’s recommendations are not legally enforceable, but they might pose another obstacle to the UK’s ambitions to regulate cryptocurrency.
The committee, headed by Conservative Party member Harriett Baldwin, issued a report on Wednesday warning against classifying cryptocurrencies like bitcoin (BTC) and ether (ETH) as conventional assets, claiming that doing so might deceive investors and give consumers a false feeling of security. Instead, the group recommended regulating cryptocurrency-related activity as gambling.
The nation’s Treasury, however, is adamant about moving through with the regulation of cryptocurrencies under the country’s current financial regulations. A government representative stressed the necessity for regulation by pointing out that cryptocurrency posed dangers comparable to those facing the banking industry. Notably, new laws are often introduced by the government in the United Kingdom.
The current involvement is seen as unconstructive by many in the crypto business, despite the fact that MPs’ mistrust has not hindered the implementation of other crypto-related rules, such as laws on financial marketing. Despite this, the Treasury continues to work to support innovation and advertise the UK as a crypto centre, even if certain ambitious goals, like as the development of a non-fungible coin, have been dialed down since Rishi Sunak’s time as finance minister.
Although the sector originally supported the Treasury’s consultation on crypto regulation in February, the most recent report has lobbyists wary. The study by the committee was challenged by Mark Foster, the European Union (EU) policy lead at the Crypto Council for Innovation, who said that it misrepresents digital assets and ignores their real-world uses, including as remittances, payments, and greater financial inclusion.
The necessity of implementing current financial regulations to crypto assets was emphasized by Adam Jackson, director of policy at Innovate Finance, who noted that doing so would maintain uniformity with other countries. He said that the UK’s stringent financial services legislation will provide a high degree of safety, including protections for vulnerable clients.
Similar thoughts were echoed by Ian Taylor, a board adviser for the lobbying organization CryptoUK, who emphasized the opportunity for consumer risk reduction via legislation and education. He challenged the idea that it is truthful or useful to compare cryptocurrencies to gambling.
The committee’s position departs from the UK’s prioritization of the financial sector. The Financial Conduct Authority currently administers the nation’s cryptocurrency anti-money laundering system and controls more conventional services like payments and consumer credit. The Financial Services and Markets Bill, which has been approved by the House of Commons and is on the verge of becoming law, includes further authority to regulate cryptocurrency.
Even if the Treasury Committee’s conclusions are not legally enforceable, according to attorney Diego Ballon Ossio, they could make things more difficult because of legislative rules. The specific law that includes cryptocurrencies in the regulatory framework must be actively authorized by votes in both houses of the UK Parliament once the Financial Services and Markets Bill is passed.
Baldwin and other Conservative Party members don’t seem to have changed their minds despite the Conservative Party having a majority in the Commons. The Institute for Government, a research tank, said that legislators normally have limited capacity to alter secondary legislation, like the current modification on crypto marketing, and seldom reject them.
The committee’s resistance is not fatal to the government’s intentions, but it does offer another political issue that has to be resolved.
