FCA Targets Crypto Lending and Credit Purchases in New Protection Measures in UK

Highlights:

• FCA plans to stop crypto lending for retail users to lower risks linked with unclear returns and asset loss.
• Use of credit for buying crypto may face a full ban due to rising debt and harm to credit scores.
• Crypto platforms must separate firm and customer trades and follow new UK rules from next year.

The UK Financial Conduct Authority has proposed new rules to manage risks in the crypto market. The rules focus on protecting individual investors from complex products. The new rules would affect areas like lending, staking, borrowing, intermediaries, and decentralized finance.

🇬🇧 BREAKING: UK to ban retail investors from borrowing money to buy crypto under new FCA rules targeting digital assets. pic.twitter.com/A5JVPydQ6G

— Cointelegraph (@Cointelegraph) May 2, 2025

The regulator expressed concern over lending services offered by crypto platforms in the country. These services allow users to loan their virtual assets and get returns based on their assets. However, the FCA stated that returns are not fixed and users often do not understand how the returns are made.

The FCA also referred to recent failures in the sector, including the crash of the Celsius Network in 2022. They stated that the events demonstrate the potential risks of crypto lending. Users lost access to a large part of their assets and were hit with transparency and counterparty risk issues.

These risks, the FCA claims, make these crypto-lending products not suitable for the average user. It also proposed a full restriction of access to these services for retail customers. The aim of this move is to lessen the odds of users losing their assets or investing in products of which they are not aware.

Credit-Based Crypto Buying Faces Possible Ban Amid Rising Debt Concerns

The authority also raised concerns about the growing use of credit to buy crypto. A recent YouGov poll showed a clear rise in such activity. In 2022, only 6% of users in the country used credit to purchase crypto. The number had increased to 14% the following year.

This shift worried the FCA due to the possible financial impact on households. FCA warned that using credit for such purchases could lead to debt. If prices fall, users may still need to repay borrowed money, along with interest and fees.

The FCA also added that missed payments could damage the credit scores of users. This means that they may have trouble getting future loans, or those loans may carry higher interest than usual. It also stated that credit can make impulse buying worse and aggravate debt problems.

While some banks and payment firms are already limiting such transactions, the majority of crypto platforms are still enabling them. Due to this, the FCA is now considering a full ban on using credit cards and e-money credit lines to buy crypto. Stablecoins issued by approved UK firms might receive different treatment. However, the general rule would stop the use of credit for purchasing most crypto assets.

Tighter Oversight on Platforms and Timeline for New Framework

The FCA also reviewed some trading platform practices as well as lending and credit. Issues such as low levels of liquidity, pricing gaps, and firms blending their own trading with customer flows were found.

The FCA proposed fixing this by separating the order flow of customers and the trading of the firm. It also wants platforms to publish clear data on pricing and how trades are carried out. Another proposed change would stop firms from paying others to direct trade orders to them. All platforms offering services to UK users must now operate under a UK-based legal entity. The FCA released a roadmap for these changes and expects the new system to take effect by 2026.