March 7, 2019 / 10:25 AM / 19 days ago

UK watchdog warns against 'get rich quick' cryptoasset purchases

LONDON (Reuters) - Consumers think they can “get rich quick” by putting cash into unregulated cryptoassets like Bitcoin and Ether they may not fully understand, Britain’s markets watchdog said on Thursday.

FILE PHOTO: Virtual currency Bitcoin tokens are seen in this illustration picture, December 8, 2017. REUTERS/Dado Ruvic/Illustration

The Financial Conduct Authority published reasearch on consumer attitudes to cryptoassets, and people it interviewed talked about wanting to buy a “whole” coin, suggesting they did not realize they could buy part of a cryptoasset.

“Despite this lack of understanding, the cryptoasset owners interviewed were often looking for ways to ‘get rich quick’, citing friends, acquaintances and social media influencers as key motivations for buying cryptoassets,” the FCA said in a statement.

The FCA and other regulators across the world have told consumers they could lose all their money in cryptoassets after huge falls in the value of Bitcoin.

But the FCA said the overall scale of harm may not be as high as previously thought, a finding that should stall the introduction of draconian new rules for now.

The UK government wants to encourage innovation in finance, particularly the blockchain technology that underpins cryptoassets.

The FCA said most UK consumers don’t even know what a cryptocurrency is, the most of those aware of it are likely to be men aged between 20 and 44, the FCA said.

Of those who had bought cryptoassets, around half spend under 200 pounds and finance the purchase from disposable income, the watchdog said.

More than half of the cryptoasset owners surveyed had bought Bitcoin, while one in three chose Ether.

“This will help us ensure we are acting on evidence as we seek to protect consumers and market integrity,” said Christopher Woolard, the FCA’s executive director of strategy and competition.

“The results suggest that although cryptoassets may not be well understood by many consumers, the vast majority don’t buy or use them currently.”

Cryptoassets like Bitcoin fall outside regulation in Britain, which means that consumers are not able to seek redress or compensation using FCA schemes if things go wrong.

Reporting by Huw Jones, editing by Sinead Cruise

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