The UK Financial Conduct Authority (FCA) is preparing to ban the use of borrowed money for cryptocurrency investments, including credit card debt, in a sweeping move aimed at protecting consumers and strengthening oversight of the rapidly growing digital asset market. The proposed ban comes amid rising concerns over financial risks and the gambling-like nature of crypto speculation.
A recent YouGov survey revealed that the number of UK residents using borrowed funds to purchase cryptocurrencies more than doubled—from 6% in 2022 to 14% in 2023. The FCA warns that such borrowing exposes retail investors to extreme losses, especially given the high volatility of crypto markets. In some cases, investors risk not only losing their crypto holdings but also other personal assets, including homes.
The Treasury committee has drawn parallels between this type of speculative investing and gambling. The FCA’s new ban is expected to face opposition from parts of the fintech sector, though the regulator maintains the need for stronger consumer protection.
UK Aligns Crypto Rules with US Strategy
Ministers have introduced draft legislation to extend traditional financial regulation to crypto firms, including exchanges, lenders, and intermediaries. This approach puts the UK in closer alignment with the United States rather than the European Union, where regulators have taken a more cautious stance.
Chancellor Rachel Reeves, who met with US Treasury Secretary Scott Bessent in Washington, confirmed that both countries would continue discussions on coordinated crypto oversight in June. Bessent, a known crypto advocate, has voiced opposition to central bank digital currencies (CBDCs), a position echoed by former President Donald Trump.
Labour Faces Internal Pressure for Tighter Crypto Controls
Within the UK, Prime Minister Keir Starmer’s government is under increasing pressure from Labour MPs who support treating retail crypto investing as a form of gambling. A 2023 parliamentary committee recommended this classification in response to rising consumer risks.
Despite this, Reeves has also signalled interest in easing some regulatory constraints as part of a broader pro-growth agenda. FCA CEO Nikhil Rathi has expressed support for streamlining rules in London’s financial sector, provided market integrity is preserved.
FCA Aims for Balanced Crypto Growth and Protection
David Geale, executive director of payments and digital finance at the FCA, emphasised that clear regulation is essential to support sustainable crypto innovation. “We want to create a crypto regime that gives firms the clarity they need to safely innovate, while delivering appropriate levels of market integrity and consumer protection,” Geale stated.
Highlighting concerns about conflicts of interest, market manipulation, and unreliable trading platforms, he added: “Our aim is to drive sustainable, long-term growth of crypto in the UK. We’re asking whether we have got the balance right.”
The upcoming legislation will grant the FCA authority over all crypto-related financial services, ensuring tighter supervision of trading platforms, crypto-lending, and investment services.
