A third of people wrongly believe that they could raise a complaint with the Financial Conduct Authority (FCA) if something went wrong and were seeking recourse or financial protection from their crypto investments.
However, presently crypto remains largely unregulated in the UK and high-risk, so if something goes wrong, it is unlikely an investor will be protected from the regulator.
In response to its own research the FCA said: “you should be prepared to lose all your money”.
The city watchdog has started to share their approach to regulating crypto and has also published a roadmap of dates for the development and introduction of the UK’s crypto regime.
This comes as 12% of UK adults now own crypto, which is up from 10% in previous FCA research.
Additionally, awareness of crypto also rose from 91% to 93% and the average value of crypto held by people increased from £1,595 to £1,842.
Respondents told the FCA that information from family and friends was the most common source of information for those who had never bought crypto.
With a tenth stating that they did not do any research before buying crypto.
AJ Bell investment analyst Dan Coatsworth said: “More people are aware of cryptocurrencies and buying them, yet an alarming number of people wrongly assume there is protection from the UK financial regulator if anything went wrong, judging by new FCA research. The fact one third of people in the FCA’s survey believe they could raise a complaint with the regulator if something went wrong and they were seeking recourse or financial protection is worrying.”
FCA director of payments and digital assets Matthew Long added: “Our research results highlight the need for clear regulation that supports a safe, competitive, and sustainable crypto sector in the UK. We want to develop a sector that embraces innovation and is underpinned by market integrity and consumer trust.
“We’re committed to working closely with the Government, international partners, industry and consumers to help us get the future rules right.”
Coatsworth did add that “the government and FCA must speed up the regulation of cryptocurrencies to avoid investors being caught out if the price of crypto assets like bitcoin blows up.
“Crypto assets are extremely volatile and the regulator has dragged its feet with creating a proper framework for the asset class. To date, the FCA only regulates crypto around anti-money laundering and marketing which means there is no proper safety net if things go wrong. We could now be at a turning point as the government has indicated it will publish a proper regulatory framework next year.”
GSB Wealth partner Paul Waterman said that despite bitcoin rise following US president-elect Donald Trump’s victory who has spoken positively about the asset class “wealth planners should remain cautious about incorporating them into comprehensive financial strategies at this stage.
“These digital assets are primarily used as a medium of exchange or a store of value. However, given the highly volatile nature, their inherent value is still questionable. Furthermore, with the regulatory landscape around cryptocurrencies still evolving, the limited recourse available for investors presents additional risks.
“The approach for wealth firms should be centred on ensuring that clients’ financial goals are met while managing risk. GSB believes in data-driven decision-making and strive to remove emotion from the investment process. While we acknowledge the potential of the crypto space, we feel that there is insufficient empirical evidence to justify fully integrating this asset class into client portfolios at this time.”
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