UK regulator moves to restrict borrowing for crypto investments

The United Kingdom’s financial regulator, the Financial Conduct Authority (FCA), plans to stop retail investors from borrowing money to fund their crypto investments.

According to a May 2 Financial Times report, the ban on borrowing to fund crypto purchases is one of the upcoming crypto rules by the FCA. David Geale, FCA executive director of payments and digital finance, told the FT that “crypto is an area of potential growth for the UK, but it has to be done right.” He added:

“To do that we have to provide an appropriate level of protection.”

Geale denied claims that the FCA is hostile to the crypto industry. Instead, he explained that he views the industry as offering high-risk investments with less consumer protection. “We are open for business,“ he said.

The interview follows the FCA seeking feedback on regulating the crypto market. In an attached document, the regulator noted that it is “exploring whether it would be appropriate to restrict firms from accepting credit as a means for consumers to buy cryptoassets.”

UK Government, United Kingdom — *FCA crypto regulation discussion paper. Source:* *FCA*

The FCA did not respond to Cointelegraph’s inquiry by publication.

FCA’s upcoming rules

The FCA aims to regulate the domestic cryptocurrency market, ruling over trading platforms, intermediaries, crypto lenders and borrowers, as well as decentralized finance (DeFi) systems. The regulator reportedly plans to introduce stricter rules for crypto services aimed at retail investors than those offered exclusively to professional or sophisticated investors.

Gale explained that the agency aims to develop a framework “that is safe and is competitive.” He said that the regulator aims to develop a regulatory regime that would attract businesses:

“If we can get the regulatory regime right it actually becomes attractive for firms. That is what we are trying to achieve.”

The FCA lending ban

The regulator explained that its upcoming ban to restrict lending to fund consumers’ crypto purchases is motivated by a concern over “unsustainable debt, particularly if the value of their crypto asset drops and they were relying on its value to repay.” The ban would also include credit card purchases.

While 2024 FCA research showed that “the leading method of payment for cryptoassets among cryptoasset users continues to be the individual’s own disposable cash/income (72%),” it also highlights a growing trend in credit purchases. The research cites that only 6% of purchases were made on credit in 2022, but this metric climbed to 14% in 2024.

The FCA also purportedly plans to block retail investors from accessing crypto lenders and borrowers. Other concerns about the crypto market cited by the regulator include market manipulation, conflicts of interest, settlement failures, a lack of transparency, illiquidity, and unreliable trading systems.

To alleviate those issues, the regulator plans to require equal trade treatment by crypto trading platforms. Other potential rules include the enforcement of a separation between proprietary trading activities from those done for retail investors and demanding transparency on trade pricing and execution.

Trading platforms would be banned from paying intermediaries for order flow, and users of staking services would have to be reimbursed for any potential losses caused by third parties. The FCA plans to exempt DeFi systems without centralized operations, as long as they do not feature a “clear controlling person.”

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