07 Mar 2019
Consumers do not understand crypto assets, FCA warns
Consumers have been warned by the Financial Conduct Authority (FCA) about turning to crypto assets, without understanding what the product is and what is being purchased, such as Bitcoin and Ether, in attempts to “get rich quick”.
Research published by the FCA reported that many consumers are influenced by friends and social media into believing crypto assets as being a “fast-track to easy wealth”.
The regulators research also found that consumers overestimated their knowledge of crypto assets, evident by them expressing their wish of wanting to buy a “whole” coin, not realising that they could only buy part of one.
However, though the FCA identified risk around not completely understanding crypto assets, they did remark that the potential damage to consumers is not as high as originally thought.
In the survey conducted by them, the FCA found that only an estimated 3% had ever bought crypto assets, where as 73% of the UK population are still unaware as to what ‘cryptocurrency’ is.
The term ‘cryptocurrency’ was most commonly recognised by middle class or upper middle-class individuals, aged 20-44 years old, particularly men.
The FCA commented:
“Consumers generally don’t spend much on cryptoassets and they tend to use their own money, with around half of those who bought cryptoassets in our small sub-sample spending under £200.”
According to Christopher Woolard, executive director of strategy and competition at the FCA, the research conducted by them had provided insight and unseen evidence into consumer interaction with crypto assets.
Mr Woolard, said:
“This will help us ensure we are acting on evidence as we seek to protect consumers and market integrity.
“The results suggest that although cryptoassets may not be well understood by many consumers, the vast majority don’t buy or use them currently.
“Whilst the research suggests some harm to individual cryptoasset users, it does not suggest a large impact on wider society.
“Nevertheless, cryptoassets are complex, volatile products – consumers investing in them should be prepared to lose all of their money.”
Currently, the FCA is consulting on the types of crypto assets that fall within their regulatory perimeter.