Investment advice crypto update
The cross-party committee set up to look at crypto regulation, said that it should be regulated in the same way as gambling.
“With no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service and should be regulated as such.
“By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”
However, the Treasury have rejected the committees’ recommendations (20/7/23). The government is worried that the UK will be left behind on the global crypto stage if it adopts this approach. It will therefore continue with the proposed regulation of crypto by the FCA.
You heard it here first. The government has been warned that crypto is a form of gambling but has chosen to ignore the investment advice. No doubt the FCA will start to offer crypto protections and all other financial firms will have to pay. That means that the cost of all other financial services across the board will increase to cover crypto gambling losses.
This comes on the back of a report in IFA Magazine (17/7/23) which estimated that there were 14 crypto billionaires worldwide. With over $40 billion in combined wealth – supposedly. It’s interesting to note that the individuals listed were the owners of various crypto exchanges and coins rather than investors who’d accumulated those levels of wealth.
Not surprisingly the USA had the most crypto by value, followed by China, Canada and Soth Korea. In the US the regulator has started to cover crypto, and a number of high-profile companies have started trading in Bitcoin.
In the UK, according to the FCA Financial Lives survey (25/7/2023) 5.8% of the population held some form of crypto assets. A lot of people. Although nowhere near as many as the 35% of people (17.5 million) who hold a traditional form of investment.
The FCA are concerned because of the growing communication of crypto through social media which is here to stay according to the figures:
- 85% of the UK population use or have used some form of social media.
- Facebook remains the most popular with 66% of the population having a Facebook account – 46 million users
- 34 million use LinkedIn
- 32 million Instagram
- 20 million are on Twitter
- Five of the 20 biggest websites in the UK are social media sites
- 87% of people said they used Google to evaluate a local business in 2022 before visiting or calling and 81% use online reviews
- 60% of under 40’s base their investment advice choices on social media posts according to FCA research
Although despite the widespread use of social media, messages about finances and savings don’t seem to make any impact.
According to the Wealthify and The Centre for Economics and Business Research the UK’s financial literacy rate is below average. The rate is calculated by asking a representative sample of people 10 general questions about finances in general. Including about inflation, investment advice and pensions savings. 75% of people in the UK got below 50% of the questions right.
This was particularly clear in young people with under 18’s scoring only 2.3 correct answers, compared to the over 70’s who scored 6.2. You have to ask what has gone wrong with financial education for young people to have such little understanding. Especially given their consumption of information through social media.
It’s a problem. The survey also showed that those with the highest scores were the most likely to have good pensions and savings. In other words, better prepared for the future.