Some UK ministers of parliament are calling for greater protection of citizens as a perceived “crypto craze” is encouraging people with little knowledge of investing to enter this new sector.

Vulnerable young people are especially in danger according to an article on inews, and the particular dangers that raise most concern are those of cryptocurrencies and NFTs.

Some niches within the cryptocurrency sector are singled out as areas where vulnerable people can lose their money. Fan tokens are one such area. The cryptocurrency Chiliz (CHZ) and all the associated separate tokens belonging to each club are being seen as “speculative investments” and linked to “gambling”.

The crypto company in question would probably argue that the fan tokens are a means for fans to engage with their club, influence decisions, and earn rewards. However, the counter-argument may be that it is pure speculation and that the tokens can lose a lot of value.

NFT artworks are another area being looked at. Some might say that these are glorified “jpegs”, and if you buy one you can be stuck with nobody to sell it to. Judging by what is happening in this space, there is probably some truth to this accusation.

However, art is an extremely subjective area, and one man’s NFT is the next Andy Warhol, while another man’s NFT is just a jpeg to be flipped as soon as possible. Whoever owns it when the music stops is pretty much stuck with a worthless item.

MPs and others are calling for the UK government to take the bull by the horns and not only fully investigate the crypto sector, but bring in some much needed regulation.

According to Conservative MP Richard Holden:

“It is the Wild West, this grey area between highly leveraged financial investments on the one hand and these products which could quite easily and sensibly be considered to be gambling. There needs to be a clear differentiation there in order to protect people.” 

Opinion

As long as incoming regulations are to protect the investor, and will not be a way to squash the undoubted innovations that crypto technologies bring to the table, it will surely be welcomed by all. 

It might be argued that the main reason for retail investors looking to invest in cryptocurrencies is that the existing financial system has failed them terribly. Expecting the average investor to put their money into a system that might give them less than 1% return, with inflation currently raging, is just wildly hopeful thinking.

Let not “protection” be prohibition, and let not “regulation” mean snuffing the life out of the only current way of earning a decent return that can beat inflation. Regulators need to walk a fine line, and it will be up to governments to see that what is passed is fair and that it encourages innovation. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.