FCA Proposes Ban on Credit Card Crypto Purchases to Protect Retail Investors

The U.K.’s financial regulator, the Financial Conduct Authority (FCA), has announced plans to implement new restrictions on retail investors' ability to borrow money to purchase cryptocurrencies. This move is aimed at protecting consumers from the potential risks associated with volatile crypto markets. The proposed regulations include banning the use of credit cards for crypto purchases and blocking access to specialist crypto lenders and borrowers.

David Geale, the FCA’s executive director of payments and digital finance, emphasized the need for a balanced approach to regulating the crypto market. “Crypto is an area of potential growth for the U.K. but it has to be done right,” he stated. “To do that we have to provide an appropriate level of protection.” The FCA’s concerns stem from the increasing number of individuals funding their crypto purchases through borrowing, which has more than doubled from 6% in 2022 to 14% in 2024. Overall, around 12% of U.K. adults now own or have owned crypto, up from just 4% in 2021.

The FCA’s proposals are part of a broader effort to bring the cryptocurrency market under its regulatory oversight. This includes regulating trading platforms, intermediaries, and crypto asset lenders and borrowers. The FCA plans to require crypto trading platforms to separate their proprietary trading activities from those done for retail investors, ensuring transparency in pricing and execution of trades. Additionally, all companies offering crypto trading to U.K. consumers will be required to operate through an authorized legal entity within the country.

These regulatory measures are designed to mitigate the risks associated with crypto investments, particularly for retail investors who may lack the financial literacy to navigate the complexities of the market. By imposing restrictions on borrowing for crypto purchases, the FCA aims to prevent individuals from accumulating unsustainable debt in the event of a market downturn. The new regulations also seek to enhance transparency and accountability within the crypto industry, fostering a more stable and secure environment for investors.

While the FCA’s proposals are a significant step towards regulating the crypto market, they also highlight the challenges faced by regulators in balancing innovation with consumer protection. As the crypto industry continues to evolve, it is crucial for regulators to adapt their frameworks to address emerging risks and ensure the integrity of the financial system. The FCA’s approach to regulating crypto assets serves as a model for other jurisdictions seeking to strike a balance between fostering innovation and protecting consumers.