The Financial Conduct Authority (FCA) has proposed a sweeping ban on cryptocurrency purchases made with credit cards and other borrowed funds, marking a significant shift in the UK’s approach to digital asset regulation.
The proposal comes amid growing concerns over rising consumer debt related to crypto investments, with a recent YouGov study revealing that the percentage of UK residents buying crypto with credit has more than doubled from 6% in 2022 to 14% in 2024.
The FCA’s rationale centers on the volatile and speculative nature of crypto assets, which they believe creates substantial financial risks when purchased with borrowed money.
It’s a bit like trying to catch a falling knife while standing on a wobbling ladder – technically possible, but probably not the wisest move for your financial health.
Leveraging credit for crypto is financial tightrope walking without a safety net—thrilling but potentially catastrophic.
The proposed ban would encompass all forms of borrowing for crypto purchases, including credit cards, personal bank loans, and crypto-specific financing options.
Retail investors would be specifically targeted, while the regulator is considering potential exemptions for qualifying stablecoins.
Consumer protection sits at the heart of the FCA’s concerns.
Many investors mistakenly believe their crypto purchases are covered by schemes like the Financial Services Compensation Scheme, which they are not.
This regulatory blind spot leaves consumers particularly vulnerable when using borrowed funds to speculate in digital assets.
The proposal is part of a broader regulatory package outlined in discussion paper DP25/1, which aims to increase oversight in the UK crypto sector.
Other measures include requiring separation of customer funds, enhanced market abuse detection, and stronger risk controls for platforms.
The UK government is working to balance robust oversight with supporting innovation in the digital finance sector, even as these tightening regulations are implemented.
This approach reflects a global trend of countries seeking to establish clear boundaries while still allowing technological advancement in the crypto space.
Industry stakeholders and the public can provide feedback on the proposals until June 13, 2025.
The move aligns with global regulatory trends, with countries like Japan implementing similar frameworks to protect consumers.
For crypto exchanges and lenders, the ban would necessitate significant adjustments to their compliance practices, potentially reducing speculative trading volumes among retail investors in the UK market.
The FCA plans to publish a formal consultation later this year after collecting public comments on the discussion paper released Friday.
