The UK's financial regulator plans to prohibit consumers from using credit cards to purchase cryptocurrencies as part of broader efforts to strengthen oversight of digital assets and limit retail financial risks.
FCA Announces Proposed Restrictions
The Financial Conduct Authority (FCA) announced on Friday that it is exploring a range of restrictions, including banning the use of credit cards and electronic money credit limits for buying crypto assets. This proposal follows a new draft law introduced this week that would bring cryptocurrency exchanges, issuers, and service providers under the same regulatory framework as traditional financial institutions.
Rising Crypto Adoption in the UK
This measure comes as cryptocurrency ownership in the UK continues to climb. Currently, approximately 70,000 adults (about 12% of the population) hold digital assets. Despite growing popularity, the FCA maintains warnings about the high risks of crypto investments, advising consumers to be prepared to lose all invested funds.
Stablecoins Remain Accessible
While credit-based cryptocurrency purchases may soon be prohibited, the proposed rules will still allow the use of borrowed funds to buy stablecoins—provided they are issued by FCA-regulated companies.
Key Differences in Treatment
- Prohibited: Credit card purchases of volatile cryptocurrencies like Bitcoin
- Allowed: Stablecoins issued by regulated entities
Crypto Lending Under Scrutiny
The regulator is also examining rules to govern cryptocurrency lending, including:
- Credit checks
- Investor knowledge assessments
- Risk disclosures
The FCA has highlighted several concerns in the lending space:
- Lack of collateral
- Poor transparency
- Limited consumer understanding
👉 Learn more about crypto regulations
Survey Reveals Shifting Trends
Recent FCA-commissioned research shows significant changes in crypto investment behaviors:
- Borrowing to invest in crypto more than doubled from 6% in 2022 to 14% last year
- About 27% of UK crypto holders engage in staking (locking tokens to earn network rewards)
Balancing Regulation and Innovation
Legal experts note the FCA faces challenges in curbing abuse while allowing innovation. Hannah Meakin, partner at Norton Rose Fulbright, observes: "This is by no means easy. The proof will be in how effective the rules are once implemented."
UK's Position in Global Crypto Regulation
- EU Comparison: Playing catch-up with the EU's Markets in Crypto-Assets (MiCA) framework
- US Context: Regulatory pressure on crypto companies eased under recent administrations
FAQ Section
Why is the UK banning credit card crypto purchases?
The FCA aims to protect consumers from high-risk investments and potential debt accumulation through volatile assets.
Can I still buy stablecoins with credit?
Yes, the proposal allows credit purchases of stablecoins issued by FCA-regulated companies.
How will this affect existing crypto investors?
Existing holdings aren't affected, but new purchases using credit cards will be prohibited if the rules take effect.
What alternatives exist for crypto purchases?
Investors can still use:
- Debit cards
- Bank transfers
- Personal funds
👉 Explore secure crypto investment options
When will these changes take effect?
The timeline remains unclear as the proposal undergoes review and potential modifications.
How does this compare to EU regulations?
The UK's approach appears more restrictive in some areas while lagging behind the EU's comprehensive MiCA framework.