The UK Treasury Committee report on crypto – which recently made headlines for equating cryptocurrency with gambling – is nothing if not trying to be helpful to the status quo and the incumbent monetary system.
I can do no better than quote Ian Taylor, board advisor at CryptoUK, who said: “We are both concerned and disappointed by these claims which are unhelpful, false, fundamentally flawed and unsubstantiated. The statement fails to reflect the true nature, purpose and potential of the crypto industry.”
The banks and others saying that regulation might give crypto a ‘halo’ effect are clearly trying to protect their own positions. The old principle of Cui Bono very much applies here – probable responsibility for an act or event lies with one having something to gain. It negates most of the people involved from being impartial.
Selecting just a couple of ‘takes’, according to the report, crypto: “serves no useful social purpose, while consuming large amounts of energy and being used by criminals in scams, fraud and money laundering.”
Taking each in turn – crypto has ‘banked’ more than 3.5 million people in El Salvador who had no access to financial services, which is almost an aside to transferring value at a fraction of the costs charged by banks.
From the report, it almost looks as if the committee doesn’t know about proof-of-stake – as opposed to proof-of-work – the former using so little energy, we use more brushing our teeth daily. But even proof-of-work for Bitcoin uses a fraction of the energy consumed by banks, and it’s mostly now powered by renewables.
Scams? Fraud? Money Laundering? All of these combined might amount to $10 billion per year – but they are probably much less. By comparison, the existing monetary system is estimated to facilitate as much as $3 trillion per annum on these fronts – so at least put that figure in some sort of context.
As for crypto serving no useful purpose, might I modestly mention Scotcoin, an ethical crypto that has helped many projects and people across the UK. In fact, the report reads like something from years ago when the incumbents did everything in their power to strangle blockchain and crypto at birth, and signally failed.
Thankfully, the Treasury itself has said it does not intend to go down the gambling route. In a statement it said: “We stand by our proposal to regulate crypto as financial services. Risks posed by crypto are typical of those that exist in traditional financial services and it is financial services regulation – rather than gambling regulation – that has the track record in mitigating them. Crypto offers opportunities, but we are taking an agile approach to robustly regulating the market, addressing the most pressing risks first in a way that promotes innovation.”
But gambling? Why gambling? Well, the committee may have thought using that word would warn people off crypto. But I hate to tell you, gambling is now endemic. Every TV channel advertises different forms of gambling – nearly all of it making the people in the advert look happy. Saying something is a gamble is almost certain to get people jumping to do it.
Crypto is only gambling in the same way that buying stocks and shares is – or fine wines, come to that. True, it is much more volatile. But there is no substance behind a crypto in the same way that when, for example, Silicon Valley Bank made incorrect bets on interest rates and T-Bills, there was no money left.
I would reiterate a statement I made in a previous article: nobody lost a thin dime from Lehman Brothers’ collapse. Why? Because it was properly regulated and the people involved were vetted and regulated. Compare that situation with FTX. It said it was regulated, when it wasn’t. It didn’t separate client and company funds. And the people involved were unregulated with no checks of any kind.
The committee also said that it recognises: “the potential for some forms of crypto assets and their underlying technologies to bring benefits to financial services and markets”. Specifically, it stated: “the potential for crypto asset technologies to improve the efficiency and reduce the cost of making payments, especially cross-border payments and in lower income countries with less developed financial sectors”. That is absolutely right – you can save thousands using crypto as opposed to legacy financial systems for money transfers. Guess who might not like that?
But finally, the committee said it is important that “the government takes a balanced approach to supporting the development of crypto asset technologies” and that it should adopt a principle of “same risk, same regulatory outcome”. I take that to mean that crypto should be regulated the same way as legacy systems, something I would wholeheartedly support.
There are never any guarantees with any form of investment. That fine wine I mentioned earlier may be corked, spirit-y, or just plain disgusting when you open it. But hey, like the tin of sardines during WW2, it’s not for eating – or drinking – it’s for buying and selling. And maybe – just maybe – it will be delightful.
A version of this article by Temple Melvillle CEO of The Scotcoin Project CIC appeared in Crypto AM