Key dealers
- The British FCA proposes prohibiting credit card usage to buy bitcoin to mitigate consumer debt risks.
- FCA aims to increase crypto market regulation by demanding British -based units and limiting crypt lending services.
The UK’s foremost financial supervisory authority is considering banning the use of credit cards and other forms of credit to buy bitcoin and other crypto assets due to growing concerns about consumer debt and financial damage.
The proposal is shown in a New discussion paper (DP25/1) Released Friday by the Financial Conduct Authority (FCA), which warns that crypto assets are high risk and speculative threats for consumers, especially when purchased with borrowed money.
“We are worried that consumers who buy crypto assets with credit can take on unsustainable debts, especially if the value of their crypto assets falls and they relied on its value to repay,” wrote FCA.
FCA also noted that many British crypto investors incorrectly believe that they are protected by mechanisms such as Financial Services Compensation Scheme (FSCS) or Financial Ombudsman Service (FOS). In reality, most crypto investments do not have such protection, and losses cannot be recycled in the event of fraud, theft or bankruptcy.
The agency said it assesses several options, including limiting or prohibiting the use of credit card to finance crypto purchases, in an attempt to reduce the risk of consumers’ surplus and speculative loss.
The move follows a similar reasoning behind FCA’s 2021 ban on the sale of cryptoderivate to retail investors.
However, FCA stated that it was considering avoiding qualified stablecoins from the proposed restrictions.
FCA is laying out a full frame for crypto regulation
In addition to the proposed credit restriction, FCA’s discussion document describes a full drawing to regulate the digital asset market in the UK, including trading platforms, intermediaries, custody providers, lending, striking and aspects of decentralized funding (Defi).
According to the essay, all crypto trade platforms that serve British retail customers would need to be approved by FCA, with potential restrictions on the main trade. Intermediaries as brokers would be held at traditional financial standards.
Suppliers of crypt lending and staking of products would have to meet strict requirements for capital, liquidity and risk management, while some defi-actors, including front-end operators and control tokens, may be responsible according to new rules.
FCA is looking for industry and public feedback to assess the consequences and feasibility of the new measures. The answers to the discussion document are open until June 13, 2025, after which FCA begins to formulate formal policy proposals.
The release comes after the British government revealed legislation aims to regulate crypto assets earlier this week.
The proposed frameworks mandate standards for openness, consumer protection and operational resilience for crypto companies, similar to those for traditional financial sectors.
