On 30 June 2020, the Financial Conduct Authority (the “FCA”) published a research report into the market size, consumer profile and attitude towards cryptoassets. This research shows that an estimated 2.6 million UK consumers have purchased cryptoassets at some point; a 1.1 million increase over 2019’s figure.

The Research

Since 2018, the FCA has worked with the Bank of England and the UK Government as part of a Domestic Taskforce on Cryptoassets. In its joint report, published in 2018, the taskforce concluded that harm to consumers was a potentially major risk factor for cryptoassets. In 2019, the FCA commissioned a consumer research report into consumer attitudes and awareness of cryptoassets in order to better understand this risk. This research concluded that 1.5 million UK consumers had purchased cryptoassets and that the market was relatively small, with most consumers spending GBP 200 on average.

However, this consumer research had certain limitations; in particular, its research pool only consisted of 2,132 participants, which is relatively small for research of this nature. Only 51 people within this pool were able to answer the specific follow-up-questions on cryptoassets since the remainder had never purchased cryptoassets. To ensure it has a thorough understanding of crypto-related risks and the potential harm to consumers, the FCA commissioned further follow-up quantitative research into consumer attitudes among a larger sample of cryptoasset owners. This 2020 study was conducted online by YouGov and surveyed 2,681 cryptoasset owners, a significantly larger pool than 2019’s study.

Key Findings

This 2020 research revealed several key findings, including that:

  • around 2.6 million UK consumers had purchased cryptoassets;
  • 83% of purchases are made through non-UK exchanges;
  • adverts play a key role in influencing purchaser’s decisions, with more than a third of respondents indicating that adverts led them to purchase cryptoassets;
  • around 1.9 million UK consumers still hold (i.e., have not sold or transferred) their cryptoassets, and over half of these holdings are worth more than GBP 260;
  • the majority of purchasers are aware of the lack of regulatory protection over cryptoassets, though approximately 300,000 purchasers believe they have protection, which leaves them at risk of potential financial harm; and
  • the majority of purchasers understand that many cryptoassets are subject to price volatility.

When announcing the findings, Sheldon Mills, the FCA’s Interim Director of Strategy and Competition, acknowledged that the cryptoasset market in the UK is growing, which should be welcome news to cryptoasset developers and exchange providers. However, in its March 2020 budget, the UK government indicated that it intends to consult on measures to bring certain cryptoassets into the scope of financial promotions regulations. Additionally, a UK policy statement is due later in 2020 regarding the banning of certain cryptoasset derivatives to retail investors. Mills further noted that, “cryptoassets present risks and opportunities for consumers and we hope these insights will help inform the policy debate in the UK and internationally as the use of these assets continue to grow”. Whether the UK takes a hard-line approach with these initiatives remains to be seen.

Author

Sue McLean is a partner in the IT/Commercial Practice Group in Baker McKenzie's London office. Sue advises clients on technology, sourcing and digital media business models and deals, as well as the legal issues relating to the implementation of new technologies. Sue advises clients (both customers and suppliers) on a wide range of technology matters including outsourcing, digital transformation, technology procurement, development and licensing, m/e-commerce, cloud computing, AI, FinTech, blockchain/DLT, social media, data privacy and cybersecurity. Sue also advises on commercial agreements and the commercial, technology and intellectual property aspects of M&A transactions and joint ventures. Sue has experience across various business sectors, including the financial services, consumer, TMT, travel and life sciences industries. She regularly speaks and writes about the impact of disruptive technologies and has a regular blog for Computerworld.

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