Britain is planning its first rules for cryptoassets, which
currently only comply with anti-money laundering safeguards.
Bitcoin and ether account for two-thirds of all cryptoassets
and are not backed by any currency or asset, leading to volatility in prices
and the potential for all money invested in them to be wiped out, the report
from parliament's treasury committee said.
Regulating retail trading and investment in unbacked
cryptocurrencies could create a 'halo' effect that leads consumers to think the
activity is safer than it is, or protected when it is not, it said.
"We therefore strongly recommend that the Government
regulates retail trading and investment activity in unbacked cryptoassets as
gambling rather than as a financial service, consistent with its stated
principle of ‘same risk, same regulatory outcome'," the report said.
The Financial Conduct Authority has repeatedly warned
consumers they could lose all of their money invested in cryptocurrencies.
Cryptoassets globally have a total market capitalisation of
about $1.2 trillion, a tiny part of the financial system, but the collapse of
crypto firm FTX exchange last year introduced greater urgency into regulating
the sector.
"The events of 2022 have highlighted the risks posed to
consumers by the cryptoasset industry, large parts of which remain a wild west,"
said Harriett Baldwin, chair of the treasury committee.
Around 10 percent of UK adults hold or have held
cryptoassets, according to official figures.
The European Union approved the world's first set of
comprehensive rules for crypto markets on Tuesday. International regulators are
due to propose global norms shortly.
The underlying technology used by cryptoassets has the
potential to improve efficiency in payments, the report said. © Reuters