The cross-party Treasury Select Committee has made a demand on the government to treat cryptocurrency investing in things like Bitcoin and Ethereum by consumers as a type of gambling.
This would mean that clear warnings should be given to investors that as well as making money, you are also at risk of losing everything as cryptocurrency has no underlying assets to back the value up. It is gambling on a piece of a unique encrypted code (a coin) that is traded i.e., bought, and sold.
There are no underlying assets to back up the market valuation of a cryptocurrency coin. This is different to investing in shares or pension and investment funds or even gold, wine, and stamps. They are all tangible. Shares mean you own a share of a company, pension and investment funds invest in shares, cash, property, and bonds, again meaning they have assets backing up the value and property, gold, wine, and stamps are physical assets that can bee seen and touched. Even our bank notes have value in that they are allegedly backed by physical gold, silver and precious metals held by the Bank of England as well as backed by the British Government.
We have long said that investing directly in shares for many is gambling. We have talked with so many clients whether they keep up to date with progress of companies and read the annual report and accounts of the companies that they own shares in. If they have not read or researched the company or the market, then they too are gambling and would it not be better to let a fund manager and their team of analysts do the research on companies.
We welcome the call by the Treasury Select Committee as consumer investing in cryptocurrency needs much starker risk warnings, in particular for younger investors who seem to think it is fund and exciting until they lose their money, as with the 75% crash in cryptocurrency values last year.