UK to Ban Retail Investors from Borrowing Money to Buy Crypto

The United Kingdom is set to ban retail investors from borrowing money to purchase cryptocurrencies as part of a new set of rules proposed by the Financial Conduct Authority (FCA), the country’s top financial regulator.

These proposed restrictions were published on Friday, shortly after the UK government outlined plans to legislate for the crypto sector.

Tackling Unsustainable Debt

According to the FCA, these measures aim to prevent investors from “unsustainable debt,” especially in cases where crypto asset values fall and borrowers are left unable to repay.

According to a recent YouGov survey, the proportion of UK investors using borrowed funds to buy crypto rose from 6% in 2022 to 14% in 2024.

As part of these proposals, the FCA plans to restrict firms from lending to consumers to fund crypto purchases, including through credit cards. It also plans to block retail access to crypto lenders and borrowers like the now-defunct Celsius Network.

The new rules would target many entities, including trading platforms, intermediaries, and decentralized finance (DeFi) systems, unless such DeFi platforms have a “clear controlling person.”

Tighter Rules for Trading Platforms and Staking Services

The FCA cited concerns over market manipulation, conflicts of interest, settlement failures, and unreliable systems in the current crypto trading environment in its proposal.

Under the proposals, crypto trading platforms must ensure fair treatment of all trades, separate proprietary trading from retail activity, and offer transparent pricing and execution data. Platforms will also be prohibited from paying intermediaries for order flow and must operate through authorized UK legal entities.

Furthermore, firms offering staking services must reimburse retail customers for any losses caused by third-party actions. While warning that most crypto assets remain high-risk and speculative, the FCA reveals its intention to support market growth within a safer regulatory framework.

Speaking on the development, the FCA executive director of payments and digital finance said:

“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.”

While some industry leaders welcomed the FCA’s focus on consumer protection, others warned that implementing these proposals would be challenging.