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UK Rejects Regulating Crypto Like Gambling — So How Will it be Legislated?

Last Updated July 21, 2023 8:54 AM
Omar Elorfaly
Last Updated July 21, 2023 8:54 AM

Key Takeaways

  • The British Finance Ministry wants to regulate cryptocurrencies in line with international practices.
  • Financial Services Minister Andrew Griffith rejects calls to regulate the industry like gambling.
  • UK Law Commission has recommended creating a distinct personal property category for crypto

Britain is edging closer to clear regulatory policies towards the cryptocurrency sector that are in line with efforts to foster the industry as the Finance Ministry rejects calls to regulate the sector like gambling.

According to an initial report from Reuters , Financial Services Minister Andrew Griffith pushed back against a report from the U.K. parliament’s Treasury Select Committee which called for cryptocurrencies to be regulated as gambling given perceived risks to the public.

In a response to the committee, Griffith said the finance ministry “firmly” disagreed with the recommendation given that it would be unlikely to avoid FTX-proportion events within the industry. 

There are also fears that such a hard line would be at odds with international recommendations from a number of standard-setting institutions. This includes the International Organization of Securities Commissions (IOSCO) and the G20 Financial Stability Board (FSB).

“The Committee’s proposed approach would therefore risk creating misalignment with international standards and approaches from other major jurisdictions, including the EU, and potentially create unclear and overlapping mandates between financial regulators and the Gambling Commission,” Griffith said.

UK Law Commission Recommends ‘Distinct’ Legal Category for Crypto

As reported  by Cointelegraph, the U.K. Law Commission carried out a common law analysis on the cryptocurrency sector at the request of the government and published its recommendations in June 2023.

The Law Commission’s major recommendation was the creation of a new and distinct category of personal property for digital assets. 

The report deliberately avoided clear specifications for the proposed category, noting that common law in the U.K. should determine what digital assets fit the bill.

A new personal property category could allow for a “nuanced approach” in recognizing cryptocurrencies and digitized instruments, including carbon emission credits or export quotas.

Included in the recommendations is a proposed industry-specific panel of technical experts, legal practitioners, academics, and judges to advise courts on various legal issues. 

Royal Assent for UK Crypto and Stablecoin Laws

King Charles also approved the Financial Services and Markets Act in May 2023 by order of Royal Assent, a legal procedure following lawmaker approval in the upper chamber of Parliament.

The Act allows the Finance Ministry to recognize cryptocurrencies as “cryptographically secured digital representation of value or contractual rights” and regulate these assets as financial instruments, products, or investments. 

A press release from the U.K. Treasury noted that the regulatory oversight would support the “safe adoption” of crypto assets in the country. This essentially paves the way for the U.K.’s Treasury, Financial Conduct Authority, Bank of England, and the Payments Systems Regulator to develop more detailed laws for the industry.

UK Looks to Keep up with Crypto-Friendly Jurisdictions

Industry participants suggest that the U.K. is evidently looking to keep pace with more progressive jurisdictions that are looking to foster respective cryptocurrency hubs, with the likes of the UAE, Switzerland, Singapore, and El Salvador becoming key crypto hubs in their own respects.

Following the Royal assent of the Financial Services and Markets Act, Ripple’s EMEA policy director Andrew Whitworth said the U.K. is making good on promises to position the country as a leading crypto hub. 

He noted that the process has been exhaustive but is attracting cryptocurrency and blockchain businesses.

“The last pieces of the puzzle will be for HM Treasury to create secondary legislation and for UK regulators to establish the rulebooks the industry needs, a process Ripple is actively supporting,” Whitworth added.

Meanwhile, layer 1 blockchain Sei Labs co-founder Jeff Feng highlighted the multi-agency approach involving the U.K. Treasury, Financial Conduct Authority, Bank of England, and the Payments Systems Regulator signals a comprehensive strategy leading to balanced and holistic regulation. 

In an emailed note shared with CCN, Feng added that the U.K. is making efforts to become a European crypto hub. 

“This is further underscored by the recent establishment of a16z’s office in London, an investment firm known for its crypto focus, signaling a growing interest in the U.K. as a crypto-friendly destination.”

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