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UK Authority Suggests Prohibition on Purchasing Cryptocurrency Using Credit Facilities

UK's financial authority ponders over prohibiting cryptocurrency purchases with credit, while also contemplating the outlawing of digital lending and borrowing platforms.

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Crypto Ban Proposed by UK Regulator

UK Authority Suggests Prohibition on Purchasing Cryptocurrency Using Credit Facilities

Here's a lowdown on the latest crypto-related news:

The Gist

The UK's Financial Conduct Authority (FCA) has put forward a plan to prohibit the use of credit, including credit cards, to purchase cryptocurrency assets. The ban would also extend to other forms of credit such as loans and digital currency credit lines.

The Rap

In a discussion paper released this week, the FCA suggested that crypto firms should be prevented from allowing British customers to buy crypto assets with a credit card. The proposed rule would also prohibit the purchase of cryptocurrency using any form of debt.

The move is driven primarily by the FCA's concerns that UK adults may be accumulating debt when they purchase crypto, a risky venture given the volatile nature of digital assets. According to a recent survey by YouGov, commissioned by the FCA, 14% of the UK's crypto users reported using credit to buy digital assets in August 2024, a significant 133% increase from two years prior.

Notably, stablecoins authorized by the FCA's regulatory regime may be exempt from the credit ban.

The Ongoing Dialogue

The FCA has now opened the rulemaking to public comment, with feedback being accepted until June 13, 2025. Other proposals from the FCA include a rule that would hold crypto staking firms accountable for financial losses suffered by retail consumers when the firm has inadequately assessed its technological and operational resilience. Additionally, the FCA has proposed a ban on all crypto lending and borrowing platforms.

Sourced and Edited by Andrew Hayward

For a Deeper Dive

  • The FCA is targeting retail investors who use borrowed funds to buy crypto assets, but qualifying stablecoins issued by FCA-regulated entities may be exempt.
  • The FCA is concerned that crypto purchases using credit have risen significantly, increasing fears of unsustainable debt if crypto values drop.
  • Many investors mistakenly believe crypto purchases are protected by safeguards like the Financial Services Compensation Scheme (FSCS), which does not cover most crypto assets.
  • The proposal follows the FCA's 2021 ban on crypto derivatives for retail investors and aligns with upcoming UK legislation to bring crypto firms under FCA oversight.
  • The FCA is soliciting public feedback until June 13, 2025, with final rules expected after further consultation later in the year. The agency aims to strike a balance between innovation and safeguards against speculative losses and market risks.

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  1. The UK's Financial Conduct Authority (FCA) has proposed a ban on purchasing cryptocurrency using credit cards or any form of debt, citing concerns about potential debt accumulation due to the volatile nature of digital assets.
  2. In the discussion paper, the FCA also suggested that crypto firms should not allow British customers to buy crypto assets with credit, which includes credit cards and digital currency credit lines.
  3. Notably, stablecoins authorized by the FCA's regulatory regime may be exempt from the credit ban.
  4. The FCA has opened the rulemaking to public comment, with feedback being accepted until June 13, 2025.
  5. Among other proposals, the FCA has suggested that crypto staking firms be held accountable for financial losses suffered by retail consumers when the firm has inadequately assessed its technological and operational resilience.
  6. The FCA has also proposed a ban on all crypto lending and borrowing platforms.
  7. Many investors mistakenly believe that crypto purchases are protected by safeguards like the Financial Services Compensation Scheme (FSCS), but most crypto assets are not covered by this scheme.
  8. The FCA's proposals are part of a broader push to regulate the crypto ecosystem and reduce the risk of speculative losses and market risks, while still fostering innovation in the digital finance and business sector.
Financial authorities in the UK are contemplating a prohibition on the use of credit for crypto purchases, as well as potential bans on cryptocurrency lending and borrowing platforms.

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