FCA Does Not Want Britons to Buy Crypto on Credit

The UK’s Financial Conduct Authority (FCA) is exploring restrictions on UK residents purchasing cryptocurrencies on credit, and is now seeking public feedback on this and other proposed regulatory measures.

“We are considering a range of restrictions, including limiting the use of credit cards to directly buy cryptoassets, and using a credit line provided by an e-money firm to do so,” the discussion paper titled Regulating Cryptoassets Activities noted.

However, the British agency would exempt authorised stablecoin purchases from these credit restrictions.

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Britain’s Move Towards Crypto Regulations

The proposal came only a few days after the UK government announced its plans to regulate the local cryptocurrency industry. According to a recent YouGov survey, the number of Britons purchasing cryptocurrencies more than doubled, from 6 per cent in 2022 to 14 per cent last year.

“Crypto is a growing industry. Currently largely unregulated, we want to create a crypto regime that gives firms the clarity they need to safely innovate, while delivering appropriate levels of market integrity and consumer protection,” said David Geale, Executive Director of Payments and Digital Finance at the FCA.

“Our aim is to drive sustainable, long-term growth of crypto in the UK.”

Read more: UK Targets Crypto Exchanges With New Rules as Adoption Triples to 12%

Currently, the FCA requires all locally operated crypto firms to register with it. However, its oversight is limited to anti-money laundering rules, the financial promotions regime, and consumer protection legislation.

Despite the mandatory registration requirement, the FCA rejected 86 per cent of applications from crypto firms in the 12 months ending April 2024. In the ongoing financial year, however, the rejection rate has declined to 75 per cent.

Controlling the Operations of Crypto Platforms

The British regulator has also raised concerns about market abuse, disclosures, stablecoins, custody, and prudential matters.

It proposes that all crypto trading platforms must treat trades equally, separate their proprietary trading activities from those of retail customers, and be transparent about pricing and trade executions. Furthermore, the discussion paper proposed banning trading platforms from paying intermediaries for order flow.

The FCA would also require crypto companies offering services in the UK to operate through an authorised local legal entity. Additionally, consumers with staked cryptocurrencies who suffer losses due to third-party actions must be compensated.

Although the regulator does not intend to cover decentralised finance operations run solely by lines of code, any such platform with a “clear controlling person” would fall under the scope of UK crypto regulations.