The United Kingdom’s relationship with the cryptocurrency industry has hit a new point of tension after a powerful parliamentary committee recommended that Bitcoin, Ethereum, and other unbacked digital assets be regulated under the country’s gambling framework rather than its financial services regime. The proposal, published on May 17, 2023, has drawn fierce criticism from industry leaders who warn it could undermine the UK’s ambitions to become a global crypto hub.
TL;DR
- UK Treasury Committee recommends regulating unbacked cryptocurrencies as gambling
- Committee chair Harriett Baldwin says crypto has “no intrinsic value” and “no discernible social good”
- Bitcoin and Ethereum, which make up two-thirds of the crypto market, are specifically targeted
- CryptoUK trade association calls the claims “false, fundamentally flawed, and unsubstantiated”
- Global crypto investment fell to $14 billion in 2022, down from $27 billion in 2021
The Treasury Committee’s Position
The UK Treasury Committee released a report on May 17, 2023, arguing that unbacked cryptocurrencies — specifically citing Bitcoin and Ethereum, which together represent approximately two-thirds of the total cryptocurrency market — pose a significant risk to consumers. According to the committee, these assets lack underlying backing, exhibit extreme price volatility, and carry the potential for total loss of invested capital.
Central to the committee’s argument is the concern that regulating crypto under the financial services framework could lend false credibility to the asset class. The report suggests that treating retail crypto trading as a regulated financial activity might mislead consumers into believing their investments carry a level of protection that simply does not exist.
“Given retail trading in unbacked crypto more closely resembles gambling than a financial service, the MPs call on the Government to regulate it as such,” the report states. This would place crypto oversight under the UK’s Gambling Commission rather than the Financial Conduct Authority, fundamentally changing the regulatory architecture governing digital assets in Britain.
Harriett Baldwin’s Strong Stance
Committee chair Harriett Baldwin MP did not mince words when presenting the report’s findings. She described cryptocurrencies as having “no intrinsic value, huge price volatility, and no discernible social good” — a characterization that immediately drew fire from the digital asset industry.
Baldwin’s comments reflect a perspective that has gained traction among certain policymakers in the UK and beyond, particularly following the market turmoil of 2022 that saw the collapse of major crypto entities and billions in retail investor losses. The committee’s position aligns with a consumer protection-first approach that prioritizes shielding retail participants from speculative risk over fostering innovation.
Industry Pushback
The response from the cryptocurrency industry has been swift and unequivocal. CryptoUK, the self-regulatory trade association for the UK cryptoasset industry, issued a strongly worded statement condemning the committee’s conclusions.
“CryptoUK strongly disagrees with the Treasury Committee’s conclusion, and we are both concerned and disappointed by these claims, which are unhelpful, false, fundamentally flawed, and unsubstantiated,” the association said. “The statement fails to reflect the true nature, purpose, and potential of the crypto industry.”
Legal professionals have also weighed in against the proposal. Richard Cannon, a partner at Stokoe Partnership solicitors, described the committee’s decision as “disappointing” and warned it “risks doubling down on the view that the UK is closed for business when it comes to crypto and tech.”
“Modern regulated economies must confront and engage with the evolution of finance, and develop a sophisticated regulatory regime which is not achieved by dismissing crypto investment as gambling,” Cannon told Verdict.
A Market in Decline
The committee’s report arrives against a backdrop of declining investment in the cryptocurrency sector. According to data from GlobalData, total cryptocurrency investment fell to just over $14 billion in 2022, a sharp decline from more than $27 billion in 2021. The sector’s investment peak came during the Covid-19 pandemic in 2020, when approximately $30 billion flowed into cryptocurrency ventures.
This downward trend has been driven by a combination of factors including the collapse of several major cryptocurrency exchanges and lending platforms, tightening monetary policy from central banks worldwide, and a broader retreat from risk assets as inflation concerns dominated global markets.
At the time of the report’s release, Bitcoin was trading at approximately $27,400 while Ethereum hovered around $1,820 — both significantly below their all-time highs but showing signs of stabilization after the steep drawdowns of 2022.
Implications for UK Crypto Policy
The Treasury Committee’s recommendation, while not binding on the government, carries significant weight in shaping policy direction. If adopted, a gambling-based regulatory framework would place the UK at odds with the European Union’s Markets in Crypto-Assets (MiCA) regulation, which takes a financial services approach to crypto oversight.
For an industry that has been watching the UK’s regulatory development closely, the committee’s stance represents a potential step backward. Many in the sector had hoped that post-Brexit Britain would position itself as a crypto-friendly jurisdiction, competing with Singapore, Dubai, and other hubs for talent and capital in the digital asset space.
Why This Matters
The UK Treasury Committee’s recommendation to treat cryptocurrency trading as gambling represents one of the most aggressive regulatory postures taken by a major Western economy’s legislative body. If this approach gains traction, it could reshape not only how the UK governs digital assets but also influence policy discussions worldwide. For the crypto industry, the episode underscores the ongoing challenge of legitimacy — even as institutional adoption grows and blockchain technology matures, powerful policymakers continue to view the sector through a lens of speculation and risk rather than innovation and opportunity.
Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. Cryptocurrency regulations vary by jurisdiction and are subject to change. Always consult with a qualified professional before making any financial decisions.
baldwin saying crypto has no intrinsic value while the pound lost 14% against the dollar that same year. bold strategy
cryptouk pushing back was the right move. regulating btc like a slot machine would have killed any chance of the UK becoming a web3 hub
comparing crypto to gambling because retail loses money? has she seen traditional market investors? the footsie took a 20% beating in 2022
the ftse 100 dropped 3.5% in a single day during the mini budget crisis. but sure, crypto is the gambling
harriett baldwin chaired the treasury committee while her husband worked in traditional finance. the conflict of interest alone should have disqualified this report