A detailed report into cryptocurrency by the Financial Conduct Authority should be regarded as a turning point that took Bitcoin into the mainstream, says a leading financial expert.
Research published by the FCA estimates that 2.3 million UK adults now hold crypto assets (up from 1.9 million last year). An impressive 78 per cent of adults have now heard of crypto assets – up from 73 per cent last year.
The consumer research shows that as holding cryptocurrencies has become more common, attitudes to them have changed. Just 38 per cent of crypto users now regard them as a gamble, whereas 47 per cent thought the same last last year. Increasing numbers see them as either a complement or alternative to mainstream investments.
Enthusiasm for Bitcoin and alt coins is growing with more than half of crypto users saying they have had a positive experience so far and are likely to buy more (rising from 41 per cent to 53 per cent). Fewer people also regret having bought cryptocurrencies, down from 15 per cent to 11 per cent.
One in 10 who had heard of cryptocurrency said they are aware of consumer warnings on the FCA website. Of these, 43 per cent said they were discouraged from buying crypto. Most consumers recognise that crypto investments are not protected, although 12 per cent of crypto users believe otherwise.
Sheldon Mills, FCA’s Executive Director, Consumers and Competition said the research highlighted a definite increase in interest in cryptocurrency among UK customers.
“The market has continued to grow, and some investors have benefitted as prices have risen,” he said.
“However, it is important for customers to understand that because these products are largely unregulated that if something goes wrong they are unlikely to have access to the FSCS or the Financial Ombudsman Service.
Prepared to lose
“If consumers invest in these types of products, they should be prepared to lose all their money.”
The research is the FCA’s fourth consumer research publication on the ownership of crypto assets. It is part of the FCA’s strategy to develop its thinking on the potential harms and benefits to consumers from crypto assets and help better understand consumers’ attitudes and patterns of use.
During that period the FCA issued further consumer warnings, stating that investing in crypto assets was high risk and that investors should be prepared to lose all their money.
The FCA says it will continue working closely with HM Treasury and other regulators, including through the UK Cryptoasset Taskforce.
Meanwhile, eToro’s Dan Moczulski said the FCA report should be welcomed as it highlights the growing significance of cryptocurrency in people’s thoughts on the future of finance. He also added that the report clearly showed Bitcoin and other digital assets were now mainstream.
“Today’s crypto asset report from the FCA paints an interesting picture of developments in the crypto asset market in the UK in the last year,” he said.
“It shows a significant increase in the number of people using and investing in crypto, plus a wider awareness among the public.
“That there are now 2.3 million active crypto asset investors in the UK makes the asset class comparable in number of participants to active share traders – a not insignificant landmark.”
Exciting opportunities
He added there were now some exciting opportunities in crypto, with a host of investable coins.
“These numbers show it has gone truly mainstream in the UK,” he said.
“With more people aware of the potential investment opportunities in crypto assets, the FCA’s findings also indicate that the growth in interest has simultaneously diminished the average level of understanding.
“It is critical that those who are interested in the market do their research and comprehend what it is they are backing. Investors should also only hold crypto as one component of a wider diversified investment portfolio.
“Major crypto assets such as Bitcoin have seen exponential growth this year, and also significant pull backs.
“For those investors who are committed to the proposition and are investing for the long-term this is not an issue, as the base case remains the same. However, anyone buying on sheer momentum needs to think again, do their research and decide if they believe in the reasoning behind the investment, not just the price movement.”