Crypto warning as savers rush to buy up unregulated digital coins

The has risen from over $37,000 (£29,400) to around $97,000 in the last 12 months, spiking in the aftermath of the US presidential election.

The UK’s main financial regulator, the Financial Conduct Authority (FCA) said 12 per cent of UK adults now own crypto, up from 10 per cent on last year.

Awareness of cryptocurrency also rose from 91 to 93 per cent while the average value of crypto held by people increased from £1,595 to £1,842. 

Intrerest in cryptocurrency, which includes other digital coins such as Ethereum, Tether and Binance has prompted the FCA to remind savers that the asset remains unregulated.

Matthew Long, director of payments and digital assets at the FCA, said around a third of people wrongly believed they could raise a complaint with the FCA if something went wrong.

He said: “Currently, crypto remains largely unregulated in the UK and high-risk. If something goes wrong, it is unlikely you will be protected so you should be prepared to lose all your money.”

The FCA is now consulting the financial services industry on the regulation of crytocurrency.

Long added: “Our research results highlight the need for clear regulation that supports a safe, competitive, and sustainable crypto sector in the UK. We want to develop a sector that embraces innovation and is underpinned by market integrity and consumer trust.   “We’re committed to working closely with the Government, international partners, industry and consumers to help us get the future rules right.” 

The FCA also published key dates for the development and introduction of the UK’s crypto regime, including a series of focused consultations. 

Dan Coatsworth, investment analyst at AJ Bell, said the government and FCA needed to speed up the regulation of cryptocurrencies to avoid investors being caught out if the price of crypto assets like bitcoin blows up.

He said: “More people are aware of cryptocurrencies and buying them, yet an alarming number of people wrongly assume there is protection from the UK financial regulator if anything went wrong, judging by new FCA research. The fact one third of people in the FCA’s survey believe they could raise a complaint with the regulator if something went wrong and they were seeking recourse or financial protection is worrying.

“Crypto assets are extremely volatile and the regulator has dragged its feet with creating a proper framework for the asset class. To date, the FCA only regulates crypto around anti-money laundering and marketing which means there is no proper safety net if things go wrong. We could now be at a turning point as the government has indicated it will publish a proper regulatory framework next year.

“If bitcoin smashes through the $100,000 level – which it is only a whisker away from doing – then even more people could find crypto on their radar.

“Regulation is long overdue as the greater the public awareness of crypto, the more we could see people dip their toe in the water, and not everyone knows what they are doing. Crypto assets are unsuitable for many investors as the asset class is extremely volatile.”

Crypto facts:

• family and friends was the most common source of information for those who had never bought crypto.
• Only 1 in 10 people say they did not do any research before buying crypto.