Consumers could be banned from borrowing money to invest in cryptocurrencies under new measures being considered by the UK’s financial regulator.
The proposal comes in a discussion paper published by the UK FCA that seeks views and feedback on the future regulation of crypto asset trading platforms, intermediaries, crypto asset lending and borrowing, staking and decentralized finance.
The regulator is also looking at the use of credit to purchase crypto assets, and whether consumers should be lent money so they can buy crypto. If implemented, the proposed framework could potentially “ban retail investors borrowing money to invest in cryptocurrencies like bitcoin,” the FT has reported.
Explaining the move, the FCA said it wants to “develop a safe, competitive, and sustainable crypto asset sector. Long-term confidence in crypto assets depends on clear regulation to promote market integrity and appropriate consumer protection.” The body wants an “open discussion” with the industry and experts on the “unique features” of digital assets, and on how best they can be regulated in the future.
The paper is aimed at drawing opinions from a wide range of organisations and individuals operating in the crypto sector, including but not limited to.
- “firms or individuals that participate in, or support the services of, the proposed regulated activities in this DP;
- “finance services participants;
- “industry groups and trade bodies;
- “professional advisors and experts;
- “consumer groups and individual consumers;
- “policymakers and other regulatory bodies; and
- “academics and think-tanks.”
Appropriate protection
Consumer protection has drawn a lot of discussion in the FCA efforts to introduce a comprehensive regulatory framework for digital assets, something that is again reflected in the latest discussion paper.
David Geale, FCA executive director of payments and digital finance, told the FT: “Crypto is an area of potential growth for the UK but it has to be done right. To do that we have to provide an appropriate level of protection.”
But the latest announcement comes in the same week the UK Chancellor confirmed overseas stablecoin issuers will be exempt from complying with the country’s future rules on digital assets.
That exemption was an effort by UK ministers to ensure “closer cooperation with the US in regulating the emerging global market for digital assets,” according to the FT.
Chancellor Rachel Reeves has insisted that easing regulatory requirements does not mean a compromise on financial misconduct. She told the Innovate Finance Global Summit in London last week: “Today’s announcement sends a clear signal: Britain is open for business, but closed to fraud, abuse, and instability.”
Both US and the UK are willing to allow overseas stablecoin issuers to sell to their consumer, while the EU has followed a different and stricter path requiring all issuers to comply with the bloc’s rules before selling to consumers there.
Final rules
The FCA has asked firms and individuals to send their feedback on the proposals in the latest discussion paper by June 13, 2025, after which it will decide on next steps. “We will consult on any proposals in this DP if we propose to adopt them as part of our final rules,” the regulator said.
Currently, the FCA has a limited regulatory remit for digital assets, revolving around “Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) and Financial Promotions regime.”
That is set to change, as the UK government pushes for more comprehensive digital assets regulation, and indicates a willingness to bring more sectors under the FCA’s regulatory umbrella.
But regulating crypto assets has remained a challenge, given the market’s decentralized nature, and the fact that anyone can open an exchange and start trading from anywhere in the world.
“The FCA is trying to achieve some level of parity with traditional markets. But crypto is different due to its decentralized market and unknown issuers,” Laura Navaratnam, UK Policy Lead, Crypto Council for Innovation (CCI) told the Market Abuse Summit 2025 in London this week.
But experts at the Summit also highlighted the fact that the FCA had an advantage, in the sense that it can see what worked in other places and what didn’t work, and could therefore make informed decisions.
