The Committee’s Regulating Crypto report, published today, laid out the Committee’s stance that the UK government should move to “protect consumers from harm” by not regulating consumer crypto activity as a financial service, but rather as gambling due to the potential risks involved.

“Unbacked cryptoassets have no intrinsic value, and their price volatility exposes consumers to the potential for substantial gains or losses, while serving no useful social purpose,” the group of cross-party MPs said in the report. “These characteristics more closely resemble gambling than a financial service, an impression reinforced by the evidence we have received of consumer behaviour.”

The report highlights Bitcoin and Ether as two prominent forms of unbacked cryptoassets, but pointed out that “the price volatility of unbacked cryptoassets exposes consumers to significant risks of losses,” and that research into crypto adoption “estimated that 73–81% of the users that entered the Bitcoin market over 2015–2022 were likely to have lost money on their investments.”

In addition to laying out the potential risks of cryptoassets, the Committee also listed the potential benefits, including the ability to reduce the cost of payments and improve efficiency, and the improving financial inclusion.

Commenting on the newly-published report, Harriett Baldwin MP, chair of the Treasury Committee, said: “The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a wild west. Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry.

“However, with no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service, and should be regulated as such. By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”

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The Treasury Committee’s report on unbacked crypto regulation comes roughly a year after Prime Minister Rishi Sunak announced his ambition for the UK to become a global hub for crypto.

The announcement — which was made in 2022 when Sunak served as Chancellor — outlined plans involving legislation to promote the usage of stablecoins and to create a Royal Mint NFT.

However, as the Treasury Committee’s report highlights, plans for the Royal Mint NFT were dropped earlier this year.