In the circle of 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 harrowing stories of dealing with a newfangled addiction: compulsive crypto trading. Some say their crypto addiction combined with an alcohol or drug habit, while others say they began by treating trading digital tokens much like gambling.
“I spent eight hours a day on Reddit reading [crypto] white papers, thinking I’m making an intellectual decision . . . it was just ridiculous,” said one patient.
Their plight goes to the heart of a dilemma for politicians around the world as they try to grapple with the impact of cryptocurrencies on their populations. Many lawmakers and companies are calling for it to be designated as a financial service, which would demand tough regulatory standards but offer consumers legal protections.
In an effort to establish London as a “hub” for financial markets innovation, the British government has set out a sweeping framework for crypto that would bring it into line with established regulations for financial services.
But in the UK last month a report from a powerful cross-party group of MPs said crypto should be regulated like gambling; people were trading assets that had “no intrinsic value” and “no discernible social good”, it said.
For those treating the 70-odd patients at the private Castle Craig rehab centre outside Edinburgh, the change in emphasis cannot come soon enough.
Crypto addicts describe their experience “as any gambler would describe their gambling addiction”, said Anthony Marini, Castle Craig’s senior specialist therapist. “So, for me, should it be regulated as gambling? Absolutely.”
More than 300 patients suffering from a form of crypto addiction have come through Castle Craig’s doors since it opened up to crypto traders in 2018, calling itself the world’s first specialist crypto addiction centre.
All hands went up during the group session when Marini asked if any patients had experienced symptoms such as suicidal ideation, chronic depression or hopelessness.
“There needs to 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 warnings and education that this can actually kill people.”
Central to the report from the Treasury select committee were concerns that handing oversight of crypto to the UK’s main markets regulator, the Financial Conduct Authority, would give the impression that crypto is “safer than it is”.
“I was seeing crypto more as an investment, so in my head I wasn’t gambling at first . . . but I don’t think it really works like that,” another gambling addict told the Financial Times.
During the therapy session at Castle Craig, patients described using crypto trading apps that were built to encourage them to invest compulsively and chase a quick profit, echoing the rougher tactics of the early online betting industry, which has been tamed to some extent by more fines being meted out by the Gambling Commission.
Gaming companies are now compelled to offer customers access to self-exclusion technology, while crypto trading apps are not. UK online betting platforms will soon have to impose stake limits and conduct basic affordability checks on users, although how this will work is still subject to consultation.
The prospect of regulations that borrow from the gambling playbook would likely “cut against” the UK government’s ambitions to become a hub for the sector, argued Paige Berges, anti-corruption and international risk counsel at law firm Ropes & Gray.
Crypto companies have also hit out at its findings, saying it underplays crypto’s potential benefits for the economy and consumers. British lobbying group CryptoUK calls the select committee report “not helpful”.
Trading venue GFO-X said: “All investors — whether retail or institutional — deserve access to orderly markets which establish price discovery, in the same way as other financial instruments or commodities. The rhetoric around crypto assets being classed as gambling is extremely unhelpful and provides worse customer outcomes.”
Moreover, the UK Treasury, responsible for developing the rules, has privately indicated it will not be swayed by the report.
“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 record in mitigating them,” said a recent email from the Treasury to the crypto industry and seen by the FT.
But there is growing evidence that the lines between crypto trading and gambling are blurred, and the worst consequences of overuse look strikingly similar.
A 2019 study from researchers at Rutgers University that looked at 876 gamblers who bet at least once a month found that increased problem gambling severity among the cohort was “strongly associated” with trading crypto.
“Your emotions are so attached to what the graph is doing, especially with crypto because it’s 24 hours a day, seven days a week. I’d be checking my phone at 3am, you lose sleep over it,” said one patient at Castle Craig.
During the week when the Terra stablecoin collapsed last May, the US National Council on Problem Gambling registered a record 19,000 users, the same number as a typical month. A 2023 study by the Blockchain Research Lab found that crypto users who also gamble tend to be “young, male, well-educated and well-off”.
The NHS National Problem Gambling Clinic, which launched in 2008, will hold its first clinic solely focused on addicted retail traders this month, and half of the dozen patients complain of compulsively trading crypto.
“The three impacts we see from gambling are on mental health, finances and on relationships. In crypto trading, what we’re seeing is exactly the same,” said Anna Hemmings, chief executive officer of gambling support organisation GamCare.
But putting crypto in one legal basket and not another also brings problems. Berges at Ropes & Gray points out that treating it as gaming could have the result of “putting crypto outside the scope of traditional financial services regulations”.
Kahlil Philander, assistant professor at Washington State University who researches the crossover of crypto and gambling, said not maintaining some oversight by the FCA would be a mistake as crypto is “pretty clearly a commodity or a security”.
Another is that the Gambling Commission, the body that would be charged with overseeing crypto, is less well-resourced than the FCA, which has more than 4,000 staff.
For years, safer gambling campaigners have complained that the Gambling Commission’s £74mn budget and 300 staff are toothless in the face of the £14bn UK gambling industry.
“The gambling sector is large and growing in this country . . . so I think in the short term it would be very challenging for the Gambling Commission to take on crypto,” said Hemmings.
But the two regulators are conscious that technology is blurring the lines between them and have pledged to work together. That was prompted two years ago by the failure of Football Index, an online betting company that styled itself as a stock market for football. It fell into administration, leaving thousands of customers unable to access their funds.
The Football Index collapse “could have been avoided not by the FCA replacing the Gambling Commission as the regulator, but by them working together”, said Matt Zarb-Cousin, the director of Clean Up Gambling. “The same applies to crypto.”
But for many addicts the regulatory turf war is a moot point and too late. As one patient at Castle Craig said: “Put gambling and crypto side by side, look at the repercussions of both of them, look at the severity of both of them, and tell me they’re not the same.”
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