The UK’s financial regulator plans to bar retail investors from borrowing to buy cryptocurrencies, the Financial Times report stated.
On Friday, the Financial Conduct Authority unveiled a wide-ranging proposal to bring more of the digital asset market under its supervision. The move follows the government’s introduction of new legislation for crypto.
Protecting Consumers from Debt
David Geale, the FCA’s executive director for payments and digital finance, told the Financial Times that the ban aims to prevent unsustainable debt.
He cited the sharp falls in crypto prices and the risk that buyers might struggle to repay loans secured against assets that then lose value. The regulator will prohibit firms from lending to customers for crypto purchases, including credit‑card loans.
Expanding Regulatory Oversight
The FCA’s draft rules would cover trading platforms, intermediaries, lenders, borrowers, and decentralised finance services. Retail crypto offerings would face tougher standards than those available only to professional or sophisticated investors.
Consumers who wish to keep full protections can remain as retail clients, while those meeting strict criteria, such as holding large investment sums and frequent trading, may opt in as professional clients.
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Clearing Out High-Risk Lenders
Among the measures, the FCA proposes to block UK retail access to specialist crypto lenders like Celsius Network. That platform failed in 2022 amid a sector‑wide crisis.
Regulators flagged multiple concerns, including market manipulation, conflicts of interest, settlement failures, poor transparency, illiquidity, and unreliable trading systems.
Trading Standards and Transparency
To tackle these issues, the FCA will require trading platforms to treat all orders equally and to separate their own trading from client business. Firms must disclose pricing and execution details openly.
The regulator will also ban payments for order flow and insist that any company serving UK consumers operate through an authorised UK‑based legal entity.
Covering Staking Services
Consumers who lock up crypto assets with “staking services” for returns will gain new protections. The FCA proposes that firms must reimburse users for losses caused by third‑party failures, giving savers more confidence in these products.
Fully decentralised systems, running purely on code with no clear controlling party, will remain outside the new rules. However, if a DeFi platform has a central figure or organisation in control, it will fall under the regulator’s remit.
Crypto firms have voiced frustration at the FCA’s high rejection rate of anti‑money‑laundering registrations. The regulator turned down 86% of applications in the year to April 2024, though the rejection rate eased to 75% in the latest fiscal year.
Firms have until June 13 to submit feedback on the FCA’s plans. If adopted, the rules would reshape the UK’s crypto landscape, offering stronger protections for retail investors while pushing high‑risk activities toward professional circles.
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