UK crypto asset ownership surges 21% to 2.3 million

Financial conduct authority warns consumers to 'be prepared to lose all their money'

FILE PHOTO: Representations of the Bitcoin cryptocurrency are seen in this illustration picture taken June 7, 2021.   REUTERS/Edgar Su/Illustration/File Photo
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Crypto asset ownership in the UK has surged by a fifth to 2.3 million people from 1.9 million last year, according to the Financial Conduct Authority, with awareness also on the rise.

The number of adults that have heard of crypto assets now stands at 78 per cent, up from 73 per cent a year earlier, as more people now consider crypto a viable investment option, the FCA said on Wednesday.

The UK financial regulator warned consumers that crypto assets are largely unregulated in the UK and they must “be prepared to lose all their money” if they choose to invest in them.

“The market has continued to grow, and some investors have benefited as prices have risen,” said FCA executive director Sheldon Mills.

“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.”

The warning comes after Bank of England Governor Andrew Bailey advised investors against buying cryptocurrencies in May.

Mr Bailey said cryptocurrencies such as Bitcoin and Ethereum “don’t have intrinsic value.”

“Now that doesn’t mean to say that people don’t put value on them because they can have extrinsic value. But they have no intrinsic value,” he said.

The FCA research also found the overall level of understanding of cryptocurrencies is on the decline, indicating that some people who have heard of crypto assets may not fully understand them, with only 71 per cent correctly identifying the definition of cryptocurrency from a list of statements.

Laith Khalaf, a financial analyst at AJ Bell, said the research paints a positive and yet terrifying picture.

“A high proportion of consumers recognise cryptocurrency is a gamble and a growing number are using it as part of a wider investment portfolio, which indicates they understand the risks and how to mitigate them," Mr Khalaf said.

“However, there is a dark underbelly lurking in the figures, which suggests there is still potential for widespread consumer harm. The fact that 14 per cent of crypto buyers have borrowed to invest is simply terrifying. The extreme volatility and uncertain long-term outlook for crypto means holdings can be wiped out."

The research was conducted in January when Bitcoin was in the midst of a strong rally having surged over its previous record high and quadrupling in value last year.