UK Proposes Ban on Borrowing to Invest in Crypto: What It Means for Everyday Investors By ChainFabricNews

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Image source: Euronews.com

In a move that could change the way people invest in digital currencies, the UK’s Financial Conduct Authority (FCA) has proposed a new rule to ban the use of borrowed money—like credit cards and personal loans—for buying cryptocurrencies.

Why? Because more and more people are diving into the crypto market using debt, and the risks are piling up.

According to the FCA, the number of retail investors using borrowed funds for crypto jumped from 6% in 2022 to 14% in 2023. That’s a big leap. And while crypto can offer exciting opportunities, it’s also highly unpredictable. Using borrowed money in such a volatile market can be dangerous, especially for people who may not fully understand what they’re getting into.

The FCA says this kind of behavior resembles gambling more than investing. With prices swinging wildly from day to day, even experienced traders can suffer big losses—let alone everyday folks using credit to chase profits. If this proposal is approved, it would mean that individuals in the UK could no longer use credit cards, loans, or other borrowed funds to purchase digital assets.

However, the proposed rules would make an exception for stablecoins issued by FCA-regulated firms. Stablecoins are a type of cryptocurrency designed to maintain a steady value, and the FCA sees them as less risky. Also, institutional investors—such as hedge funds and financial firms—would still be allowed to use borrowed capital to trade crypto, as they’re considered more capable of handling the risks.

This isn’t just about borrowing. The proposal is part of a larger effort to introduce stronger regulations around crypto trading in the UK. The goal? To protect consumers while still allowing the industry to grow responsibly. This includes more transparency from crypto platforms and tougher rules to prevent market manipulation.

Not surprisingly, reactions have been mixed. Some in the financial world support the FCA’s approach, saying it's important to protect people from getting in over their heads. But others worry that the UK could fall behind other countries that are more welcoming to crypto businesses. Industry groups like Global Digital Finance have voiced concerns, arguing that too many restrictions might push innovation away from the UK.

For now, nothing is set in stone. The FCA is asking for public feedback on the proposal through June 13, 2025. This gives individuals, businesses, and investors a chance to weigh in before any final decisions are made.

Whether you're a casual investor or just curious about crypto, this proposed change is worth keeping an eye on. It’s a reminder that while the crypto world can be exciting, it also comes with serious risks—and regulators are stepping in to make sure people don’t get hurt.

 

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