FCA study finds scale of cryptoasset harm might not be as high as expected

The Financial Conduct Authority (FCA) has released new research around UK consumer attitudes around cryptoassets such as Bitcoin and Ether.

Included with the research are qualitative interviews with UK consumers and a national survey.

From the research, there were some indications of potential harm such as consumers not fully understanding what it is they are buying. An example given by the FCA was that a number of consumers it spoke with stated whey wanted to buy a ‘whole’ coin and not necessarily understanding people can buy parts of these cryptocurrencies.

Key drivers for buying these tokens were listed as ways to ‘get rich quick’, stating citing friends, acquaintances and social media influencers as reasons they bought into cryptos. Both the survey and research found that some cryptoasset owners made their purchases without completing any research.

However, the FCA’s research found the overall scale of harm might not be as high as previously thought. Of the UK consumers to be surveyed, 73 per cent of them did not know what a cryptocurrency was or unable to define it – those most unaware were men aged between 20 and 44.

Of those to be surveyed, the FCA estimated only three per cent had ever bought cryptoassets, and of those, around half had spent under £200 in total. A high majority of those to by cryptos also stated it was financed through disposable income.

Bitcoin was the most favoured crypto, with over 50 per cent having owned the token, while one in three chose Ether.

FCA executive director of strategy and competition Christopher Woolard said, “This research gives us evidence we haven’t had before about how consumers interact with cryptoassets. This will help us ensure we are acting on evidence as we seek to protect consumers and market integrity. The results suggest that although cryptoassets may not be well understood by many consumers, the vast majority don’t buy or use them currently.

“Whilst the research suggests some harm to individual cryptoasset users, it does not suggest a large impact on wider society. Nevertheless, cryptoassets are complex, volatile products – consumers investing in them should be prepared to lose all of their money.”

The FCA is working with the government and Bank o England as part of a UK Cryptoassets Taskforce which aims to understand and address harms from cryptoassets and inspire innovation. The regulator is currently consulting on guidance to clarify types of cryptoassets which will fall under regulatory perimeters.

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