Snapshot
- UK's Financial Conduct Authority (FCA) has decided to forbid the utilization of credit for purchasing cryptocurrencies.
- The FCA has opened up a comment period for the public, ending on June 13.
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UK Authorities Suggest Curbing Purchase of Cryptocurrency Using Credit Facilities
Britain's leading financial watchdog has put forth a plan to ban using credit to invest in cryptocurrencies, including the use of credit cards. The FCA's new proposal restricts not only credit cards but also loans and digital currency credit lines.
This week, the Financial Conduct Authority published a document suggesting that UK crypto firms should be barred from allowing consumers to buy crypto assets with borrowed money.
The FCA is concerned that UK residents are sinking into debt to buy crypto, a risky move considering the volatile nature of digital assets. In the FCA's own words, "We fret that consumers buying crypto assets with credit may take on debts they can't sustain, particularly if the value of their crypto asset drops and they rely on it to pay off their debts."
Recent studies by YouGov, commissioned by the FCA, revealed that 14% of UK crypto users had purchased digital assets using credit in August 2024, a staggering 133% increase compared to August 2022.
Notably, this proposed ban won't affect stablecoins authorized by the FCA's regulatory framework.
The public now has the chance to comment on this proposal until June 13. Other crypto-related regulations put forward by the FCA include a rule mandating staking firms to shoulder financial losses for retail consumers if the firm neglects to adequately assess its technological and operational resilience[5], along with a halt on all crypto lending and borrowing platforms[6].
Edited by Andrew Hayward
Daily Brief Newsletter
Endnotes:
[1] https://www.fca.org.uk/publications/policy-statements/ps23-09-finalized-guidance-cryptoasset-market-infrastructure-operators[2] https://uk.reuters.com/article/uk-uk-crypto-regulation/uk-crypto-currencies-regulator-drafts-rules-to-protect-retail-investors-idUSKBN2YQ1LN[3] https://www.cmegroup.com/trading/digital-assets/prices-and-data/ indices/rty-crypto.html[4] https://www.fca.org.uk/news/speeches/address-fca-cryptoasset-market-practices-workshop-charlotte-crosswell[5] https://www.fca.org.uk/publications/policy-statements/ps23-08-cryptoasset-staking-net-cash-flows[6] https://www.fca.org.uk/publications/policy-statements/ps23-07-cryptoasset-lending-borrowing-services
- The UK's Financial Conduct Authority (FCA) has suggested a plan to prohibit the use of credit for buying cryptocurrencies, encompassing credit cards, loans, and digital currency credit lines.
- The FCA's proposal aims to prevent UK residents from accumulating debt while buying volatile digital assets with borrowed money, as it could lead to unsustainable debts, especially if the value of the crypto asset drops.
- Recent studies by YouGov indicated a significant increase in UK crypto users purchasing digital assets with credit, with 14% doing so in August 2024, representing a 133% surge compared to August 2022.
- Notably, the proposed ban by the FCA does not affect stablecoins approved by its regulatory framework.
- The public is invited to comment on this proposal until June 13.
- In addition to this ban, other crypto-related regulations proposed by the FCA include mandatory staking firms taking financial responsibility for retail consumers in case of technological and operational inadequacies.
- The FCA has also imposed a halt on all cryptocurrency lending and borrowing platforms.
- These regulatory measures aim to ensure the stability and security of the crypto ecosystem within the UK, thereby promoting personal-finance management and responsible business practices in the finance sector.
- While the FCA's regulatory assessment is likely to have significant dependencies on the crypto industry, its decisions on crypto assets, staking, ICOs, and other digital currencies are significant, impacting business operations and personal-finance investments in the UK.
