FCA: Thrill & Status-Seeking Young People Are Investing in Crypto; BIS Boss Calls for Regulation

Britain’s Financial Conduct Authority (FCA) says younger people seeking thrills are turning to high-risk crypto assets and foreign exchange though most of them are unable to absorb big losses.

The FCA shared the findings of its latest research that showed that new, younger, and more diverse groups of customers are getting involved in high-risk investments.

Reportedly, these consumers tend to be female, under 40, and from a BAME (Black, Asian, and minority ethnic) background, using social media for news and tips, said the agency.

“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.”

The FCA said it was launching a campaign to “disrupt” an investors' journey by directing them to a high-return investments webpage covering key questions investors should be asking before investing.

“We are worried that some investors are being tempted – often through online adverts or high-pressure sales tactics – into buying higher-risk products that are very unlikely to be suitable for them.”

Sheldon Mills FCA Executive Director for Consumer and Competition

Online trading has been increasing ever since the pandemic that forced people to stay at home during lockdowns, and regulators have been issuing warnings to consumers about the risks of investing in crypto assets.

Agustin Carstens, the general manager of the Bank for International Settlements (BIS), meanwhile called for regulation of crypto assets which he said are used as a “speculative vehicle.”

Many crypto assets are “used to do some arbitrage, or to circumvent some regulations,” and laws against money laundering and terrorism financing were “absent in many applications of some cyber currencies,” said Carstens in an interview with CNBC aired on Wednesday.

“I don’t see any dominance of cyber currencies,” he said, adding cryptos haven’t made “any inroads in terms of working as money.”

As for stablecoins, they have limited applications with the issue of backing; Carstens said, “I think we need to work on regulation so that these instruments are fit for purpose.”

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