If you’ve been making purchases of cryptocurrencies in the UK using credit cards, that practice may soon end. The Financial Conduct Authority (FCA) has put forward a proposal aimed at preventing retail investors from acquiring cryptocurrencies through borrowed means, which encompasses credit cards, personal loans, and loans from crypto-specific providers. However, there are concerns that this ban could stifle innovation in the crypto market, limiting access for users.
This initiative is part of wider measures designed to protect consumers from accumulating debts in pursuit of volatile digital assets. The FCA is reacting to a significant increase in individuals utilizing debt for cryptocurrency investments; research indicates that the proportion of such consumers has risen from 6% in 2022 to 14% in 2024.
Why the FCA Wants to Step In
The FCA’s fundamental concern is that more individuals are borrowing to invest in digital assets, which poses a significant financial risk. The market’s extreme volatility can lead to severe financial consequences for those who incur debt in hopes of profits.
“The UK is preparing to ban consumers from buying cryptocurrency with borrowed funds, according to recent FCA announcements. This move raises questions about the future of crypto investment practices. What impact will this regulation have on the market?”
— Primos Pinturas (@PrimosPinturas) Twitter
The FCA stresses that the gains in the crypto market are prone to wild fluctuations, potentially leaving investors not only with losses but also unmanageable debts.
What the Ban Would Cover
The proposed regulation extends beyond credit cards, targeting all forms of borrowing for cryptocurrency purchases, including loans from traditional financial institutions and crypto lenders. An exception might be made for stablecoins if they are issued by firms registered with the FCA and possess adequate backing.
The intent here is to prevent financial pitfalls before more consumers spiral into debt due to speculative investments.
What Else Is Changing
The FCA’s suggested regulations are part of a comprehensive approach to tightening the framework around cryptocurrency transactions, which includes:
- Mandating registration for crypto platforms with the FCA
- Prohibiting platforms from trading with their own assets while serving customers
- Increasing transparency about pricing and transaction execution
- Banning the practice of payment for order flow, where platforms compensate brokers for client trades
- Ensuring that staking providers are responsible in the event of failures caused by third-party validators.
Public Feedback and Industry Reaction
The FCA is currently hosting a public consultation until June 13, 2025. The regulatory body maintains that its aim is not to stifle the crypto industry but rather to add necessary safeguards to a sector that has historically operated with minimal regulation.
Looking Forward
If the ban is enacted, it could transform how retail investors engage with cryptocurrency in the UK, marking a shift towards more prudent financial practices when investing in digital assets.
