FCA: 73% of UK consumers cannot define what cryptocurrency is


CEO of Charles Schwab contends cryptos are speculative and not crucial

The UK’s Financial Conduct Authority (FCA) released two research reports focused on analyzing consumer attitudes towards cryptocurrencies such as Ethereum and Bitcoin. The research teams asked UK consumers to participate in qualitative interviews as well as in a nationwide survey.

The qualitative research revealed that consumers could be potentially harmed by crypto assets since many did not even understand the basic qualities of such assets, such as purchasing fractions of cryptos, instead of whole coins and tokens. Many interviewees who were interested in cryptos were looking to ‘get rick quickly’ from their investments motivated by the idea that their friends and social media influencers seem to be making huge profits from crypto assets.

The qualitative interviews and the nationwide survey both revealed that some crypto holders purchased the digital assets without doing any prior research. The good news was that, despite the lack of understanding of digital assets among most UK consumers, the survey revealed that not many consumers have been harmed by cryptos as was previously assumed.

According to the survey, 73% of UK consumers cannot define what cryptocurrency is, while those familiar with crypto assets are most men between the ages of 20 and 44. The researchers estimated that only 3% of the consumers who did the survey had ever purchased crypto assets. Of this small group of crypto buyers, about 50% bough assets worth less than £200, with a large percentage saying they used their disposable incomes to fund their purchases.

Bitcoin was the favorite cryptocurrency among consumers as over 50% of the crypto buyers surveyed said they bought the digital asset, while 34% bought Ethereum.

Christopher Woolard FCA
Christopher Woolard, FCA

The Executive Director of Strategy and Competition at the FCA, Christopher Woolard, said:

This research gives us evidence we haven’t had before about how consumers interact with cryptoassets. 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.

The FCA has previously issued warnings to consumers that digital assets including Bitcoin are very volatile and carry a lot of risk. The regulator has also warned that many digital tokens are currently unregulated within the UK, and as such losses arising from the sale, purchase and transfer of such assets may not be reported to the Financial Ombudsman Service and are not covered under the Financial Services Compensation Scheme.

The research studies are part of the FCA’s efforts to understand the risks posed by crypto assets to UK consumers in order to address such risks. The FCA is seeking legal guidance on which types of digital assets fall within the current regulations, and also plans to consult on the prohibition of the sale of specific types of crypto derivatives to retail investors within the UK. This is a collaborative effort by the FCA, the Bank of England and HM Treasury.

Vaibhav Kadikar, CEO of Decentralized Derivatives Trading Platform CloseCross, commented on the report:

The most heartening take away from the survey is that people that understand cryptocurrencies sustain a long term view and are committed to at least a 3-year horizon for holding the assets. Also, within that same crypto literate group, there is no buyers remorse in spite of the bearish market the past 15 months. This is a positive insight and reveals how once educated, the public can see the great potential for cryptocurrencies.

The implication for the broader industry remains the same – work on compelling use cases and drive adoption. Until the wider population understands what they can do with cryptocurrencies and why the benefits outweigh the cons, we will remain at the lower end of adoption.

Education alone will not drive adoption, compelling use cases will. It is not up-to the FCA or universities. That would only go so far.

The report should neither encourage nor discourage anyone within the entire financial industry, from incumbents to start-ups, from entering the space. At this early stage, the space is mostly dominated by visionaries and early-adopters. While mainstream companies and developers may be tempted to wait until the technology has been embraced by the masses, in this fast-moving world that may be too late.

Liam Murphy, Director of professional services firm Wachsman, said:

I firmly believe that we will see greater appreciation of the extraordinary potential of crypto assets among the UK public through 2019. This will be induced in no small part by the expected global growth in the number of Security Token Offerings (STOs), which offer legal rights and regulatory certainty more usually associated with traditional securities, as well as the general increase in the tokenisation of assets, not least of commodities such as oil and gold.

This evident maturation of the space presents an enormous opportunity for the UK, particularly due to the advantages it has garnered from being Europe’s financial hub. In 2017, the UK financial services sector accounted for 1.1 million jobs and contributed £119 billion to the UK economy, amounting to 6.5% of total economic output. With increased regulatory certainty surrounding crypto assets, the UK will be uniquely positioned to leverage the considerable human and economic resources at its disposal. Only time will tell whether it will realise its true potential as a powerhouse in the space.

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FCA: 73% of UK consumers cannot define what cryptocurrency is

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