Insights into the FCA Crypto Roadmap and Consumer Research

The UK's Financial Conduct Authority (FCA) is making significant progress toward regulating the burgeoning cryptoasset sector. Its recently unveiled Crypto Roadmap outlines a comprehensive framework spanning 2023 to 2026. This plan seeks to create a safe, competitive, and sustainable crypto industry by addressing key areas like stablecoin regulations, trading platforms, financial promotions, and consumer protections.

In tandem with these regulatory efforts, the FCA’s 2024 Cryptoassets Consumer Research provides critical insights into how the public interacts with cryptoassets. The findings highlight the growing role of crypto in the financial lives of UK citizens and the importance of well-informed regulatory interventions to mitigate risks.

The Crypto Roadmap: Building a Secure and Transparent Market

The FCA’s phased approach to regulation has already seen significant developments:

• 2023: Implementation of financial promotion rules to safeguard consumers from misleading advertising.
• 2024: Introduction of governance measures such as the Senior Managers and Certification Regime (SMCR) and initial stablecoin custody and issuance regulations.
• 2025: Expansion of prudential measures to address capital, liquidity, and risk management, alongside the introduction of trading platform, lending, and staking rules.
• 2026: Full implementation of the regime, culminating in a robust regulatory framework.

These measures aim to balance innovation with the need for market integrity and consumer trust, ensuring that the UK remains a competitive hub for crypto activities.

Consumer Research Highlights: Awareness, Ownership, and Risks

The FCA’s consumer research underscores the increasing prominence of cryptoassets in the UK. Awareness of cryptoassets among UK adults has reached 93%, and ownership has climbed to 12%, representing approximately 7 million individuals. While the average value of holdings has risen to £1,842, the survey reveals disparities in consumer understanding and a significant underestimation of the risks involved.

• Ownership Trends: Bitcoin remains the most popular cryptoasset, held by 52% of users, followed by Ethereum (42%). Newer assets like Dogecoin (21%) and Solana (19%) are gaining traction.
• Demographics: Ownership is higher among younger individuals (18-34 years), males, and those in higher income brackets, with 25% of households earning £100k or more holding crypto.
• Motivations for Investment: The leading reason for purchasing crypto is as part of a broader investment portfolio (36%), while speculative gambles account for 26%. Saving for retirement and long-term goals is a growing motivation, reflecting a maturing market.
• Information Sources: Social media (28%), online forums (38%), and friends or family (36%) are key information channels for investors. However, 10% of buyers conducted no research before investing.
• Regulatory Expectations: 27% of users indicated they would invest more in crypto if the market were regulated, while 25% would do so if regulations included financial protections.

Risks, Misunderstandings, and Fraud

Despite the growing interest in crypto, the research highlights significant risks and misunderstandings:

• Misplaced Confidence in Protections: One in five users believes they would receive financial compensation for losses, a misconception that leaves many vulnerable.
• Fraud and Scams: 26% of users encountered suspicious activities, with 9% falling victim to fraud. Common scams include fake endorsements and phishing schemes, often propagated through social media.
• Limited Understanding: While 58% of users claim to understand how crypto works, this figure drops significantly among non-users, indicating a knowledge gap that exposes consumers to risks.

Consumer Behaviour and Market Dynamics

The research also sheds light on how consumers engage with the market:

• Storing Crypto: Most users (72%) store their crypto on exchanges, despite growing awareness of security risks.
• Usage: Two-thirds of crypto users actively use their holdings, primarily for converting to cash or other currencies.
• Volatility: While 52% of users reported gains in 2024, 23% experienced losses, underscoring the market's volatility.

FCA’s Commitment to Consumer Protection

The FCA has intensified its efforts to address these risks. Since implementing the financial promotion regime, it has issued over 1,700 alerts, taken down 900 scam websites, and launched educational initiatives like the ScamSmart campaign. These measures aim to protect consumers while fostering confidence in the market.

Looking Ahead

Matthew Long , Director of Payments and Digital Assets at the FCA, emphasises the importance of balanced regulation: “Our research results highlight the need for clear regulation that supports a safe, competitive, and sustainable crypto sector in the UK.” The FCA’s roadmap and research provide a clear path forward, ensuring innovation thrives within a secure and transparent framework.

As the crypto landscape evolves, this roadmap serves as a blueprint for stakeholders navigating the complexities of regulation. With consumer awareness and ownership at an all-time high, the FCA’s proactive approach is a timely intervention to ensure the sector’s long-term sustainability.