FCA Report Indicates Young People Invest In Crypto Without Understanding Potential Risks

Reuters has reported findings from Britain's Financial Conduct Authority (FCA) that indicate that younger people invest in cryptocurrencies without having a full understanding of potential risks involved. The UK financial watchdog noted that a number of social factors were also responsible for younger people getting involved in high-risk investments.

The report from the FCA outlined the profile of crypto and FX traders in the UK and their involvement in so-called high risk investments.

“A new, younger, more diverse group of consumers are getting involved in higher-risk investments, potentially prompted in part by the accessibility offered by new investment apps”

59% of the study subjects also said they had less than three years experience in investment, and said a significant investment loss would have a fundamental impact on their current or future lifestyle. It was also suggested that the pandemic has increased the number of british citizens who participate in trading and investment. The FCA findings listed an increase in the female under 40 demographic, as well as those from a BAME background.

“The research found that for many investors, emotions and feelings such as enjoying the thrill of investing, and social factors like the status that comes from a sense of ownership in the companies they invest in, were key reasons behind their decisions to invest,”

Crypto regulation in the UK is still in a grey area, but financial regulators have issued warnings in relation to investments in crypto assets, and UK Anti-Money laundering regulation is still in place for all crypto based platforms, regardless of if they are subject to financial regulation now or in the future.

The FCA Consumer investments data review, published last year, outlined how higher risk investments may be suitable for consumers who understand the risks and can absorb any potential losses. However the review stated that “most retail investors needs can and should be met by straightforward, mass-market investments”.

In the meanwhile retail investment continues to soar in the UK, and cryptocurrencies, particularly Bitcoin are the investment of choice for a widening demographic that includes women and minorities.