The Financial Conduct Authority (FCA) estimates that 2.6 million people in the UK have bought cryptocurrency, with a significant increase in the past 12 months.
Following online research, conducted by YouGov, the FCA estimates that 1.9 million still hold cryptocurrency, with half of them holding more than £260 worth.
It found that while most owners of cryptocurrency in the UK are knowledgeable, many do not realise they are not protected by regulation.
The FCA research was conducted to gain an understanding of the size of the market in the UK and customer attitudes to cryptocurrencies. The online survey revealed that most people who own cryptocurrencies in the UK are knowledgeable about them, and understand there is a lack of regulation and a risk that prices are volatile. Most owners surveyed (83%) bought their cryptocurrency through non-UK exchanges.
There are hundreds of cryptocurrencies around the world, such as bitcoin, ripple and ether. Bitcoin is the most prominent example. The bitcoin protocol enables peer-to-peer (P2P) exchange in a decentralised system that, unlike conventional currencies, is not associated with any financial institution or government.
About a third of the 2,600 people surveyed said adverts made them more likely to buy cryptocurrency.
But many owners are opening themselves up to potential financial losses. From the survey findings, the FCA estimates around 300,000 people who own cryptocurrencies mistakenly think they are protected.
“Many are not currently regulated in the UK,” said the FCA. “This means the transfer, purchase and sale of such tokens currently falls outside our regulatory remit, leaving customers unable to make complaints to the Financial Ombudsman Service or seek protection from the Financial Services Compensation Scheme.”
Sheldon Mills, interim executive director of strategy and competition at the FCA, said the report revealed the increasing popularity of cryptocurrency among UK consumers and underlined the need to better understand the market and how people interact with these assets.
“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 continues to grow,” said Mills.
In the March 2020 Budget, the government said it intends to consult on measures to bring certain cryptocurrencies into scope of financial promotions regulation.