On 26 November 2024, the United Kingdom’s Financial Conduct Authority (FCA) released its latest findings on UK consumer attitudes and behaviours towards cryptocurrencies. The report revealed that 12% of UK adults now own crypto, up from 10% in previous research. Awareness of cryptoassets also rose from 91% to 93%, showing a growing public interest in digital currencies. Despite this, the UK FCA reiterated its warning that crypto remains high-risk and largely unregulated, advising consumers to prepare for the possibility of losing their entire investment. On 12th August 2024, the UK FCA released its fifth wave of cryptoasset consumer research, presenting an intricate portrayal of the UK’s engagement with cryptoassets. Conducted through YouGov’s comprehensive online methodology, the study discusses consumer trends, behavioural shifts, and the burgeoning landscape of cryptocurrency ownership. This structured survey gathered data from 3,296 participants, split into representative and targeted cryptoasset user groups.
The UK FCA report shows a steady increase in public awareness of cryptoassets and suggests growing public familiarity. Legal challenges remain in ensuring that consumers fully understand the risks involved. A portion of respondents continue to misunderstand the lack of regulatory protections, with 20% believing they would receive compensation in case of losses. This raises questions about the adequacy of disclosure requirements for crypto platforms. The UK FCA’s emphasis on consumer education is a step forward, but the findings shows the need for mandatory risk warnings in advertising and user agreements.
Ownership of cryptoassets has risen to 12%, representing over seven million UK adults. Interestingly, the report highlights that the average value of holdings increased from £1,595 to £1,842, reflecting deeper consumer engagement. Most purchases are still funded through disposable income, but the increased use of credit cards (14%) raises legal concerns about financial overextension and debt risks. The popularity of platforms such as Coinbase and Binance shows the legal imperative of ensuring these exchanges operate transparently and securely. Centralised exchanges dominate the market, but their regulatory status remains a grey area, as does the oversight of their trading practices and custodial services.
The report delves into consumer risks, including scams and fraud. 10% of cryptoasset-aware individuals reported encountering fraudulent activity, with social media scams, fake endorsements, and phishing attacks leading the list. From a legal perspective, this highlights the urgent need for regulatory intervention to curb deceptive practices and enhance accountability among platforms. The findings of the Report also show that 32% of cryptoasset users experienced negative events, such as withdrawal issues or forgotten passwords.
Nearly 38% of crypto-aware respondents reported exposure to crypto advertisements, with social media being the most common medium. While advertising creates opportunities for market growth, its legal implications are significant. The report shows that only 32% of respondents noticed a risk warning in these advertisements. The UK FCA has already begun enforcing financial promotion rules, but the findings suggest that stricter oversight is required to ensure all advertisements meet regulatory standards.
The report underlines the pressing need for a regulatory framework, with 27% of crypto users stating they would invest more if the sector were regulated. Interestingly, 58% of current users said they were comfortable trading in an unregulated market, illustrating the sector’s appeal despite the risks.
The UK FCA’s proposed regulatory roadmap includes phased consultations to develop a comprehensive framework. This approach seeks to balance innovation with consumer protection, a key challenge given the sector’s fast-paced evolution. Legally, this marks a shift towards aligning UK regulations with global standards while addressing market-specific risks.
Crypto staking has emerged as a popular activity, with 27% of users participating in the past year. This growing trend introduces new legal complexities, particularly around the classification of staking rewards as income or securities. Without clear regulatory guidance, disputes over taxation and investor protections are likely to arise. Similarly, the rise of credit-based purchases and crypto lending shows the need for financial safeguards. Legal clarity on the treatment of crypto loans and the enforcement of lending terms will be essential as the market matures.
Around a third of respondents believed they could raise a complaint with the UK FCA for losses. This exposes the gap in public understanding and the challenges of enforcing consumer rights in a largely unregulated environment. The UK FCA’s efforts to clarify its role and issue consumer alerts are commendable but insufficient. A broader legal framework is required to establish mechanisms for dispute resolution, liability, and compensation, particularly for fraud and platform failures.
(Source: https://www.fca.org.uk/publication/research-notes/cryptoasset-consumer-research-2024-wave-5.pdf, https://www.fca.org.uk/news/press-releases/fca-finds-crypto-ownership-continues-rise-it-delivers-plans-regulate-crypto)
