The UK’s Financial Conduct Authority (FCA) has unveiled proposals to ban retail investors from using borrowed funds, including credit cards, personal loans, and e-money credit lines, to purchase cryptocurrencies. The move, detailed in a new discussion paper (DP25/1), aims to curb the risks of unsustainable debt and speculative losses, as crypto adoption surges among everyday Britons.
The crackdown targets a worrying trend: 14% of UK crypto purchases in 2024 were funded by credit, up from just 6% in 2022. With over 7 million Britons holding digital assets, regulators fear that volatile price swings could leave households stranded with insurmountable debts.
The ban would apply to all forms of credit. However, qualifying stablecoins, issued by FCA-authorized entities, such as regulated GBP- or USD-pegged tokens, may be exempt—a nod to the growing role of stablecoins in payments.
FCA Taming Crypto Markets and Industry Response
The restrictions aimed at regulating digital currency markets include proposals to curb crypto lending, create staking safeguards, mandate transparency among crypto exchanges, and carve out what defines DeFi.
However, these proposals are not without anticipated challenges and may hinder sector innovation. For instance, the FCA risks stifling innovation in a sector where the UK has sought to become a global hub. Furthermore, previous crises have shaped its stance.
For instance, the 2021 ban on crypto derivatives for retail investors—followed by reports of young traders racking up six-figure losses—set the precedent. Now, with crypto credit use doubling, the agency is intensifying its regulatory efforts.
However, the regulator plans to host a stakeholder forum to gather feedback, and the message is clear: consumer protection trumps digital assets’ libertarian ethos.
The UK’s move mirrors global trends. The EU’s Markets in Crypto-Assets (MiCA) regime, set for 2026, imposes strict consumer safeguards, while the U.S. has targeted digital currency lending via enforcement actions. Yet the FCA’s credit ban is among the most direct assaults on retail speculation.
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