In early 2020, the UK Financial Conduct Authority (FCA) introduced its Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) supervision for crypto asset businesses. Firms operating under the Money Laundering Regulations (MLRs) must register with the FCA to conduct relevant business. Later that year, the FCA, in collaboration with the UK government and the Bank of England, released the Consumer Research Report on Crypto Assets (2020). This landmark study offers crucial insights into how UK consumers interact with the crypto market, their awareness levels, and the potential risks they face.
Key Findings on Crypto Asset Ownership in the UK
The FCA's research estimated that 3.86% of the UK adult population, approximately 1.9 million people, owned crypto assets at the time of the study. This marked a significant increase from previous years.
The distribution of ownership revealed notable concentration:
- Half of all crypto owners held assets valued at £260 or less.
- Three-quarters of respondents reported holdings not exceeding £1,000.
- A small minority held substantial sums, with the top 20% of owners holding over 80% of the total monetary value.
Awareness of crypto assets also saw a dramatic rise. The proportion of adults who had never heard of cryptocurrencies dropped to 27%, down from 58% just a year earlier.
The Role of Media and Advertising in Crypto Awareness
Media coverage played a pivotal role in driving consumer awareness and interest. Bitcoin was the most widely recognized asset, though a significant portion of respondents (22%) were also aware of Libra (now Diem), which had not yet launched.
Advertising was a powerful influence on consumer behavior:
- 45% of current and former crypto owners reported seeing crypto-related advertisements.
- Among those, 35% (roughly 400,000 adults) stated that these ads increased their likelihood of making a purchase.
- 16% of all owners indicated that advertising directly influenced their decision to buy.
Investor Awareness and Regulatory Understanding
A critical finding was that most investors entered the market with a clear understanding of its unregulated nature. An overwhelming 89% of buyers correctly understood that their purchases were not protected by regulatory safeguards, a figure that rose from 84% in 2019.
When asked about their primary motivation for investing:
- Nearly half (47%) viewed buying crypto as a form of gambling—"something that might make money or might not."
- Only 15% stated they were hoping to "get rich quick."
- Investors who viewed it as a gamble were more likely to be aware of the lack of regulatory protection.
Funding Sources and Consumer Risk
The study delved into how consumers funded their crypto purchases, uncovering potential vulnerabilities:
- The vast majority (91%) used disposable income, savings, or proceeds from selling other assets.
- However, 8% of owners, equating to approximately 215,000 people, funded their purchases entirely through borrowed money. This included loans from financial institutions, friends or family, or credit cards.
- Consumers who borrowed typically invested smaller sums (half invested less than £120) and often demonstrated a lower understanding of the underlying technology or regulatory status, heightening their potential risk.
Trading Platforms and Holding Patterns
The research highlighted a strong reliance on international exchanges among UK consumers:
- 77% of respondents used online exchanges to buy crypto assets.
- Only 5% exclusively used UK-based exchanges.
- A significant 83% conducted all their trading on platforms based outside the UK.
Holding patterns varied considerably. Investors with less knowledge tended to hold assets for shorter periods. Conversely, those who invested larger sums and viewed it as a long-term gamble were more likely to be long-term holders. Higher-value holders also tended to have higher household incomes, with over 40% reporting earnings above £50,000.
Usage, Sentiment, and Reported Issues
The report explored how consumers used their crypto assets and their overall sentiment:
- Among those who had sold assets, usage was split almost evenly between those who never used them for anything (40.7%) and those who purchased goods and services (38%).
- A strong majority (85%) of current owners expressed no regret about their purchases, even if the value of their assets had decreased.
- Nonetheless, 17% of owners reported negative experiences, citing issues like high transaction fees, slow processing times, theft, and extreme price volatility.
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Frequently Asked Questions
What was the main purpose of the FCA's 2020 Crypto Asset Consumer Report?
The FCA conducted this research to understand how UK consumers were interacting with the crypto asset market. It aimed to identify common behaviors, levels of awareness, and potential consumer harms to inform future regulatory policy and protect consumer interests.
How many people in the UK owned crypto assets according to the report?
The FCA estimated that 3.86% of the UK adult population, approximately 1.9 million people, were crypto asset owners at the time of the study in late 2019. This showed a notable increase from ownership rates in previous years.
Were most investors aware of the risks?
Yes, a key finding was that 89% of buyers correctly understood that crypto investments were not covered by UK regulatory protection schemes. This indicated that most consumers were aware of the inherent risks and lack of safety nets.
Did the report find that people were borrowing money to buy crypto?
Yes, the data showed that 8% of crypto asset owners, about 215,000 people, funded their purchases entirely through borrowed funds. This was identified as a potential risk factor, especially for those with lower understanding of the market.
What were the most common reasons people bought crypto assets?
The primary motivation, cited by 47% of owners, was that they viewed it as a gamble—something that might make or lose money. Only a small minority (15%) said they were motivated by a desire to "get rich quick."
Where did most UK consumers buy their crypto assets?
The vast majority of UK consumers used online exchanges based outside of the UK. Only 5% of owners exclusively used platforms that were based in Britain, underscoring the global and borderless nature of the crypto market.