Surrounded by a therapy session in an 18th-century Scottish country house are half a dozen recovering addicts. Many recall, at their lowest points, battling chronic depression and contemplating suicide.
The patients, all male, share heartbreaking stories of dealing with a new addiction: compulsive cryptocurrency trading. Some say their addiction to cryptocurrencies is combined with an alcohol or drug habit, while others say they started out treating digital token trading much like gambling.
I spent eight hours a day reading on Reddit [crypto] white paper, thinking about making an intellectual decision…it was just ridiculous, said one patient.
Their plight gets to the heart of a dilemma for politicians around the world as they try to address the impact of cryptocurrencies on their populations. Many lawmakers and businesses are calling for it to be designated a financial service, which would require strict regulatory standards but offer consumers legal protections.
In an effort to establish London as a hub for financial market innovation, the UK government has established an overarching framework for cryptocurrencies that would bring it in line with regulations set for financial services.
But in the UK last month a report from a powerful cross-party group of MPs said cryptocurrencies should be regulated like gambling; people traded goods that had no intrinsic value and no discernible social good, he said.
For those who treat the 70 or so patients at Castle Craig private rehabilitation center outside Edinburgh, the shift in emphasis cannot come soon enough.
Addicts describe their experience as any gambler would describe their gambling addiction, said Castle Craig Senior Specialist Therapist Anthony Marini. So, to me, it should be regulated like gambling? Absolutely.
More than 300 patients suffering from a form of cryptocurrency addiction have passed through Castle Craig’s doors since it opened to cryptocurrency traders in 2018, billing itself as the world’s first specialist center for cryptocurrency addiction.
All hands were raised during the group session when Marini asked if any patients had symptoms such as suicidal ideation, chronic depression or hopelessness.
There must be a health warning [on crypto exchanges] just like any gambling site, Marini said. People have lost families, people have lost their jobs, people have embezzled… there needs to be warning and education that this can actually kill people.
At the heart of the Treasury Select Committee report were concerns that handing over the oversight of cryptocurrencies to the UK’s top market regulator, the Financial Conduct Authority, would give the impression that cryptocurrencies were safer than they are.
I was seeing cryptocurrencies more as an investment, so in my head I wasn’t gambling at first… but I don’t think it really works that way, another gambling addict told the Financial Times.
During the therapy session at Castle Craig, patients described using cryptocurrency trading apps created to encourage them to invest compulsively and chase a quick profit, echoing the tougher tactics of the early online betting industry, which was to some extent tamed by multiple fines being awarded by the Gambling Commission.
Gaming companies are now forced to offer customers access to self-exclusion technology, while cryptocurrency apps are not. UK online betting platforms will soon have to impose wagering limits and conduct basic user accessibility checks, although how this will work is still subject to consultation.
The prospect of regulations that borrow from the gambling playbook would likely run counter to the UK government’s ambitions to become a hub for the sector, said Paige Berges, anti-corruption and international risk adviser at law firm Ropes & Gray.
Cryptocurrency companies have also criticized its results, saying it underestimates the potential benefits of cryptocurrencies for the economy and consumers. British lobbying group CryptoUK calls the select committee report unhelpful.
Trading Venue GFO-X said: All investors, whether retail or institutional, deserve access to orderly markets that dictate price discovery, in the same way as other financial instruments or commodities. The rhetoric about crypto assets classified as gambling is extremely pointless and provides worse results for customers.
Additionally, the UK Treasury, responsible for developing the rules, has privately said it will not be affected by the report.
The risks posed by cryptocurrencies are typical of those that exist in traditional financial services and it is financial services regulation rather than gambling regulation that has the record in mitigating them, a recent email from the Treasury to industry said of cryptocurrencies and seen from the FT.
But there is growing evidence that the lines between cryptocurrency trading and gambling are blurring, and the worst consequences of excessive use seem strikingly similar.
A 2019 study by researchers at Rutgers University that looked at 876 gamblers who gambled at least once a month found that increased problem gambling severity among the cohort was strongly associated with trading cryptocurrencies .
Your emotions are so tied into what the chart is doing, especially with cryptocurrencies because it’s 24 hours a day, seven days a week. I’d check my phone at 3am, you lose sleep over it, said a patient at Castle Craig.
During the week that stablecoin Terra crashed last May, the US National Council on Problem Gambling had a record 19,000 users, the same number as in a typical month. A 2023 study by the Blockchain Research Lab found that cryptocurrency users who also gamble tend to be young, male, educated, and affluent.
The NHS National Problem Gambling Clinic, launched in 2008, is holding its first clinic focused exclusively on employed retail traders this month, with half a dozen patients complaining of compulsive cryptocurrency trading.
The three impacts we see from gambling are on mental health, finances and relationships. In cryptocurrency trading, what we’re seeing is exactly the same, said Anna Hemmings, chief executive of gambling support organization GamCare.
But putting cryptocurrencies in one legal basket and not another also brings problems. Ropes & Gray’s Berges points out that treating it like a game could have the result of excluding cryptocurrencies from the scope of traditional financial services regulations.
Kahlil Philander, an assistant professor at Washington State University who studies the intersection of cryptocurrencies and gambling, said not maintaining an FCA oversight would be a mistake as cryptocurrencies are clearly a commodity or a security.
Another is that the Gambling Commission, the body charged with overseeing cryptocurrencies, has fewer resources than the FCA, which has more than 4,000 employees.
For years, Safer Gambling campaigners have complained that the Gambling Commission’s £74m budget and 300 employees have nothing to do with the £14bn UK gambling industry. .
The gambling industry is large and growing in this country…so I think it would be very difficult for the Gambling Commission to deal with cryptocurrencies in the short term, Hemmings said.
But the two regulators are aware that technology is blurring the lines between them and are committed to working together. This was triggered two years ago by the bankruptcy of Football Index, an online betting company that billed itself as a stock market for football. It fell into administration, leaving thousands of customers unable to access their funds.
The collapse of the Football Index could have been prevented not by the FCA replacing the Gambling Commission as regulator, but by working together, said Matt Zarb-Cousin, director of Clean Up Gambling. The same goes for cryptocurrencies.
But for many addicts the regulatory turf war is a moot point and too late. As one patient at Castle Craig put it: Put gambling and cryptocurrencies side by side, look at the repercussions of both, look at the severity of both, and tell me they are not the same.
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