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UK Set to Ban Crypto Purchases Made with Borrowed Funds

May 2, 2025

The UK’s financial watchdog plans to prohibit retail investors from borrowing to buy crypto under sweeping new regulations focused on market safety and consumer protection.

Background

  • The Financial Conduct Authority (FCA) has unveiled a major policy proposal aiming to reshape the digital assets market in the UK by imposing stricter rules on retail investor activity.
  • A central provision is the planned ban on using borrowed funds including credit cards to purchase cryptocurrencies such as Bitcoin and Ethereum.
  • This move is said to be part of a broader effort to bring the largely unregulated crypto sector under the same regulatory scrutiny as traditional financial services.
  • The proposal comes shortly after the UK government announced its legislative framework for digital assets. According to FCA executive director of payments and digital finance David Geale, the objective is to encourage responsible innovation while minimizing consumer risk.
  • The FCA’s review follows recent YouGov data showing that 14% of crypto buyers in the UK now use borrowed funds, more than double the rate in 2022.

Why should you pay attention?

  • The UK is moving toward becoming one of the first major economies to restrict leveraged crypto purchases by retail investors.
  • The rules could impact crypto companies offering staking, trading, or lending services to UK-based users.
  • FCA regulation is often watched internationally, potentially influencing how other countries approach crypto policy.
  • The ban reflects increasing concerns about consumer debt, market volatility, and the collapse of high-profile lenders like Celsius.

Who said what?

  • David Geale, FCA executive director:
“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.”
  • Joey Garcia, Xapo Bank:
“As such an internationally influential regulator, as soon as the FCA starts to regulate the crypto market they are giving it a massive stamp of approval—so I understand their caution.”
  • Riccardo Tordera-Ricchi, Payment Association:
“The government says it is open for business, but in practical terms it will be difficult for the FCA to implement this—they don’t have an easy job.”

Zooming out

  • The FCA’s planned restrictions aim to limit access to high-risk crypto markets by retail users while offering a clearer path for institutional engagement.
  • Notably, decentralized finance (DeFi) platforms will remain exempt unless there is an identifiable controlling entity. Meanwhile, trading platforms will face new mandates around transparency, fair execution, and separating proprietary and client activity.
  • Interestingly, the FCA has previously faced criticism over the high rejection rate of crypto firm registrations (86% in 2023, dropping to 75% in 2024).

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