The UK plans to ban people from borrowing money to buy crypto, as regulators move to take full control of a market that’s been running wild. On Friday, the Financial Conduct Authority (FCA) announced it wants to stop retail investors from using loans or credit cards to fund crypto buys.
This comes just days after the government revealed plans to finally introduce a legal framework for the crypto market. The FCA’s new rules are massive and target everyone from trading platforms to lenders and intermediaries.
The regulator wants to take power over all crypto services aimed at retail users, while giving professional investors a different set of standards.
FCA bans all consumer lending for crypto buys
David Geale, executive director of payments and digital finance at the FCA, told the Financial Times, “Crypto is an area of potential growth for the UK, but it has to be done right. To do that, we have to provide an appropriate level of protection.”
David rejected the idea that the FCA is against crypto companies, saying, “I would in some ways compare this to any other high-risk investments, which if anything often have less protections… We are open for business.”
The regulator now wants to stop firms from lending money to retail users for crypto — including through credit cards. David said the FCA is worried about users getting stuck in “unsustainable debt, particularly if the value of their crypto asset drops and they were relying on its value to repay.” The numbers already show a growing problem.
A YouGov poll found that the percentage of UK residents using borrowed funds to buy crypto doubled from 6% in 2022 to 14% in 2023.
As part of the new rules, the FCA wants to block retail access to crypto lenders like Celsius Network, which blew up in 2022 and wiped out millions in user funds. David also said, “We started from a position of wanting to develop something that is safe and is competitive. If we can get the regulatory regime right, it actually becomes attractive for firms. That is what we are trying to achieve.”
The watchdog raised serious concerns about how crypto trading platforms operate. It called out market manipulation, conflicts of interest, settlement failures, low liquidity, unreliable trading systems, and a lack of transparency. To deal with this, the FCA said it will force platforms to treat all users the same, keep their own trades separate from client trades, and give users full visibility on prices and how trades are executed.
Platforms will no longer be allowed to pay intermediaries for order flow. Every firm that wants to serve UK crypto users must set up a legally approved entity within the UK. That includes any platform, exchange, or trading service — no more skirting rules from offshore.
The new proposals also go after staking services, where people lock their crypto in exchange for a return. If anything goes wrong because of a third-party issue, the companies running the service must reimburse users for their losses. The rules will apply to centralized platforms only.
Purely decentralized services — run on code with no single operator — will be left alone, unless the FCA finds a clear person controlling the system.
FCA still warns about existential threats
Even with all these rules, the FCA says crypto will still be dangerous. The regulator said, “The majority of crypto assets will remain high risk — speculative investments and consumers should be prepared to lose all their money if they buy them.”
Still, it claims the goal is to “encourage growth as far as reasonably possible.”
Many crypto companies have already clashed with the FCA. The agency has been rejecting registration applications at an extreme rate. Between April 2023 and April 2024, 86% of applications were denied. That number dropped slightly this year to 75%, but the struggle to get registered remains.
Despite the friction, some in the industry say they understand the FCA’s approach. But others see problems. Riccardo Tordera-Ricchi, director of policy and government relations at the Payment Association, said, “The government says it is open for business, but in practical terms it will be difficult for the FCA to implement this — they don’t have an easy job.”
The FCA is now giving the industry until June 13 to send in their responses.
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