The committee, headed by chair Harriett Baldwin, argued in May that the Government’s plan to regulate such trading as a financial service would create a false sense of security among consumers, since these cryptocurrencies are often volatile and risky. Ms Baldwin referred to the cryptocurrency industry as a “wild west” and likened trading in it to gambling, warning consumers they could lose all their money.

The Treasury countered this position, expressing firm disagreement with the committee’s recommendations. The Treasury argued that aligning cryptocurrency trading with gambling would risk creating confusion between the mandates of financial regulators and the Gambling Commission. Furthermore, such an approach could deviate from the internationally accepted standards set by bodies such as the International Organization of Securities Commissions and the G20 Financial Stability Board.

The Treasury also emphasised that these international standards uphold the principle of “same activity, same risk, same regulatory outcome”, meaning any cryptoasset activities akin to those in the conventional financial system should be regulated similarly. They warned that a gambling regulatory system might fail to address critical risks linked to market manipulation, inadequate financial arrangements, and deficiencies in core financial risk management practices.

The Treasury upheld that a financial services regulatory framework would better address the risks associated with unbacked cryptoassets and foster safe innovation. They also assured that this framework would entail robust measures to alleviate consumer risks, including the danger of consumers being misinformed.