The Financial Conduct Authority (FCA), the UK’s financial services and retail investments sector regulator has reported a new surge in the number of Brits investing in crypto assets. An estimated 2.6 million Brits are thought to have put money into digital assets such as bitcoin. But a new wave of interest in the nascent sector has, according to new FCA research, seen the number grow by 1.1 million over the past 12 months.
The research found that 1.9 million people in the UK hold cryptocurrencies with around 50% having invested more than £260. Digital assets can be either cryptocurrencies or tokens, such as those sold by digital companies raising cash through Initial Coin Offerings (ICOs). ICOs are a non-regulated alternative to IPOs and popular with companies building blockchain-technology products and services.
It’s no secret that there was a boom in interest among small, private investors in cryptocurrencies during the market’s 2017 intense bull run that saw the value of bitcoin soar from around $1000 to $20,000.
The extent of the price surge for bitcoin, and the crypto asset market more generally, did prove to be a bubble and prices crashed by up to 70% or 80% over the first few months of 2018. But cryptocurrencies didn’t go away and over the past year bitcoin recovered to and has held at between around $9000 and $11,000.
What is a surprise is the evidence of a significant resurgence in interest in digital assets over the past 12 months. Cryptocurrencies and other digital assets exist only online and so far have little practical, real-world use. Much of the hype around the potential of blockchain technology has also died away with few successful use cases having genuinely established themselves.
But supporters of digital assets clearly remain convinced in their potential to transform the financial system despite criticism they have no real, inherent value. The reverse argument is that neither do fiat currencies, which also now predominantly exist in only electronic form. And that at least cryptocurrencies are not controlled by central banks with the power to print money at will, increasing supply and reducing the value of already circulating currency.
Crypto assets are notoriously volatile in their price movement and regularly see big swings. They are also unregulated, leaving investors exposed if things go wrong and represent a significant risk of losing all value. There is no protection from the Financial Services Compensation Scheme.
The FCA’s research is part of an investigation to inform a possible decision on a complete ban. It is considering outlawing the sale of crypto asset-based derivatives such as CFDs, that allow for leveraged betting on price direction. But the FCA may also take more of an active role in the sector. The government has proposed the regulation of the promotion of some kinds of digital assets.
The research was based on a YouGov poll that asked 2681 respondents if they owned any crypto assets. A further finding of the research was that 300,000 crypto investors mistakenly believe their holdings are protected by regulations.
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