Investors buy cryptoassets such as bitcoin in order to “get rich quick”, tend to “overestimate their knowledge” and often invest without “much, or any, research”, according to a survey by the UK financial regulator on the use of cryptoassets.
The Financial Conduct Authority has been probing the potential harm done to consumers using cryptoassets like bitcoin, a digital currency that surged in popularity in 2017 but has since shed around 80 per cent of its value.
The watchdog found customers buying cryptoassets were “looking for ways to ‘get rich quick’” and many customers “perceived cryptoassets as a shortcut to easy money and wealth”.
Customers were “aware of risks, including price volatility” but some said risk was “part of the attraction”, according to the regulator.
Meanwhile investors had little sense of how or why they would sell their assets, which are unregulated and must be traded on specialist crypto exchanges.
The FCA said: “Many [customers] don’t appear to have any strategy to sell their assets or a sense of what would motivate them to do so.”
The regulator commissioned two surveys to explore the attitudes and motivations underpinning the way consumers use and think about cryptoassets. Those included interviews with 31 cryptoasset customers and a survey of more than 2,100 UK consumers about their awareness and behaviour regarding cryptoassets.
Crypto customers were most likely to be middle- to upper-class men aged between 20-44. Outside of that bracket cryptoassets were not widely recognised or understood.
The FCA said a small number of UK consumers had bought cryptoassets and said 73 per cent of those surveyed did not know what a cryptocurrency was, or could not define it.
The watchdog, along with the Treasury, has been attempting to crack down on harmful elements of the market in cryptocurrencies as part of a government-led Cryptoasset Taskforce.
The FCA is considering a ban on high-risk derivative products linked to cryptoassets, which are often highly leveraged and result in heavy losses to investors. The Treasury is also set to consult this year on whether the FCA’s remit should be broadened in order to put it in charge of a greater part of the crypto industry.
But its research comes as the market in currencies such as bitcoin has stalled. Bitcoin traded at $20,000 in 2017 but now sits at a price of less than $4,000 following a sell-off last year as a result of disagreements within the coin developer community and persistent concerns about heightened regulation.
Christopher Woolard, the FCA’s executive director of strategy and competition, said: “Cryptoassets are complex, volatile products; consumers investing in them should be prepared to lose all of their money.”
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