UK to Rein in Crypto Spending and Lending

The UK is set to impose regulations on the use of credit cards for purchasing cryptocurrencies and on crypto lending products, aiming to protect consumers. The government plans to introduce laws to regulate crypto, focusing on curbing 'bad actors' while promoting innovation in the evolving industry.

The UK government has announced a set of new regulations intended to limit the use of credit cards for purchasing cryptocurrencies as well as their role in crypto lending products. This move is designed to bolster consumer protections as cryptoassets become regulated for the first time. The Financial Conduct Authority (FCA) revealed these plans on Friday, emphasizing the need for consumers to be prepared for potential financial losses when investing in cryptoassets.

As part of the new regulatory framework, cryptocurrencies will be brought under compulsory regulation, with exchanges, dealers, and issuers required to comply with existing rules. Despite crypto trading gaining widespread popularity—reportedly involving 7 million individuals, or 12% of the UK's adult population—regulation remains limited. The government aims to reduce misconduct while encouraging legitimate advancements in the industry.

The FCA is also considering restricting the use of credit cards for directly buying cryptoassets and curbing the use of credit lines provided by e-money firms. Consumers will still have access to borrowed funds for purchasing stablecoins from FCA-regulated companies. The regulator's survey indicates a significant rise in credit usage for crypto purchases, sparking consideration of further restrictions and consumer protection measures. While institutional investors will not face such curbs, regulatory efforts will also focus on enhancing transparency and understanding of crypto 'staking'.

(With inputs from agencies.)