1.1m spike in cryptoasset buyers

An estimated 2.6m UK consumers have bought cryptoassets at some point, an increase of 1.1m in the past year, according to research by the Financial Conduct Authority (FCA), which has expressed concerns about lack of regulation in this sector

The research found that of the 1.9m that still hold their cryptoassets – such as Bitcoin, Ripple or Ether – half have more than £260.

The online study of over 2,600 individuals found the majority of cryptoasset owners are generally knowledgeable about the product, are aware of the lack of regulatory protection afforded and understand the risk of price volatility.

However, an estimated 300,000 cryptoasset owners believe they have protection, which leaves them at potential risk of financial harm.

The research also found that adverts play a key role in influencing cryptoasset consumers’ decisions, with more than a third of respondents saying an advert made them more likely to purchase cryptoassets.

Of those who purchase cryptoassets, 83% do so through non-UK based exchanges.

Sheldon Mills, FCA interim executive director of strategy and competition, said: ‘This FCA report reveals the increasing popularity of cryptoassets among the UK consumer population and underlines the importance of our work to gain a deeper understanding of this market and how people interact with these assets. 

'Cryptoassets present risks and opportunities for consumers and we hope these insights will help inform the policy debate in the UK and internationally as the use of these assets continue to grow.'

The FCA has previously warned that cryptoassets are highly volatile and risky. Many are not currently regulated in the UK, meaning that the transfer, purchase and sale of such tokens currently fall outside its regulatory remit, leaving buyers unable to make complaints to the Financial Ombudsman Service or seek protection from the Financial Services Compensation Scheme. 

The FCA is working with the government and Bank of England, as part of a UK Cryptoassets Taskforce, to understand and address the harms from cryptoassets whilst encouraging innovation in the interests of consumers. 

In its March 2020 Budget, the government said it intends to consult on measures to bring certain cryptoassets into scope of financial promotions regulation. A policy statement is due this year following a consultation on banning the sale of certain cryptoasset derivatives to retail investors. 

US regulation

In the US, the Securities and Exchange Commission (SEC) has won a legal challenge against Telegram Group, which has agreed to return more than $1.2bn to investors and to pay an $18.5m civil penalty to settle claims its unregistered offering of digital tokens called ‘Grams’ violated the federal securities laws.

The regulator alleged the company had raised capital to finance its business by selling approximately 2.9bn Grams to 171 initial purchasers worldwide. The SEC claimed these were securities that had been offered and sold in violation of the registration requirements of the federal securities laws.

Kristina Littman, chief of the SEC enforcement division's cyber unit, said: ‘New and innovative businesses are welcome to participate in our capital markets but they cannot do so in violation of the registration requirements of the federal securities laws.

‘This settlement requires Telegram to return funds to investors, imposes a significant penalty, and requires Telegram to give notice of future digital offerings.’

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