According to a report released on Wednesday, a group of UK lawmakers recommends that Bitcoin, Ether, and other cryptocurrencies be treated as gambling due to their potential use by fraudsters and the considerable risks they pose to consumers.
Britain is preparing its first set of regulations for cryptoassets, which at the moment merely adhere to anti-money laundering precautions.
According to the study from parliament's treasury committee, bitcoin and ether make up two-thirds of all cryptoassets and are not backed by any asset or currency, which causes price volatility and the possibility that all money invested in them might be lost.
Regulation of retail trading and investing in unbacked cryptocurrencies could have the consequence of giving consumers the impression that these activities are safer or more protected than they actually are, according to the report.
The report stated that the trading and investment activities in unbacked cryptoassets by retail investors should be regulated as gambling instead of financial services to maintain consistency with the government's principle of "same risk, same regulatory outcome." It further recommended that the government take necessary steps in this regard.
The Financial Conduct Authority has regularly cautioned consumers that investing in cryptocurrencies carries a risk of losing all of their money.
Despite having a market capitalization of only about $1.2 trillion, which is a relatively small portion of the overall financial system, the collapse of FTX exchange in the previous year has heightened the need for regulating the cryptoassets industry globally.
Harriett Baldwin, who serves as the Chair of the Treasury Committee, stated that the events that occurred in 2022 have underscored the dangers that the cryptoasset industry poses to consumers, particularly given that several aspects of the industry are still largely unregulated and therefore akin to the wild west.
According to official statistics, 10% of UK citizens currently own or have previously owned cryptoassets.
On Tuesday, the European Union passed the first comprehensive set of rules for crypto markets. Soon, worldwide regulations are expected to be proposed by international regulators.
According to the analysis, the underlying technology of cryptoassets has the potential to increase payment efficiency.