UK Consumers Don’t Know What a Cryptocurrency is

Mar 14, 2019

UK consumers don’t know what a cryptocurrency is, according to research from the British financial regulatory body, the Financial Conduct Authority (FCA).

On 7 March, the FCA published two research pieces on UK consumer attitudes to cryptos, including qualitative interviews and a national survey. The research is the result of a joint report from 2018 as part of a UK domestic taskforce on cryptos, involving the FCA, the Bank of England and HM Treasury.

The 2018 Cryptoassets Taskforce: final report set out the UK’s policy and regulatory approach to cryptoassets (or cryptocurrencies) and Distributed Ledger Technology (DLT). The report recognized three major risks concerning cryptoassets which had to do with market integrity, financial crime and consumers. In regards to consumers, the 2 research pieces were commissioned to provide evidence of consumers’ usage of cryptoassets.

Research

The first piece has been produced by research firm Revealing Reality and examines “the attitudes, understanding, motivations and beliefs that underpin people’s decisions to buy assets in this new and fast-changing landscape and the information and individuals that influence them.”

According to the research, consumers decided to purchase cryptoassets for various reasons including: “their attitudes towards making money,” “information they received,” and “their beliefs about and understanding of the cryptoassets market.” The first reason was a desire to “get rich quick” and with “minimal effort.” As one of the respondents, Ashton, 26, is quoted saying: “I guess I didn’t have the career that my parents wanted, but I’m lazy. My priority is enjoying life. I just want to get rich and retire.”

Additionally, Fear of Missing Out (FOMO) is one of the main reasons for most respondents for buying cryptoassets, as many had read articles or heard stories about people buying Bitcoin around 2017 and becoming rich. Many others referred to magazines and online media on cryptocurrencies and blockchain where the information shared gave them access to the latest news on cryptos, and thus an “edge” compared to others.

In relation to what cryptos people buy and why, the majority of respondents relied on Coinbase for buying and managing their cryptos, where they purchased cryptoassets including Bitcoin, Ethereum and Litecoin. Others used Binance, Coinfloor and Blockchain Wallet, but they were “unable to understand how they worked, so either tried and failed or did not try at all.”

Whole Coin?

The first survey revealed a widespread misconception that cryptoassets were a real physical currency, due to references to “coins” and “vaults.” Many consumers seemed to have the impression that they were investing in “immutable, unique assets, which would retain their value and would at some point be worth a lot more than they are today.” As it was highlighted, respondents explained that they bought cryptos based on the fact that they could buy a “whole coin” and did not realise that they could buy a fraction of Bitcoin, instead of buying “more” Litecoin with the same amount of money.

Cryptoassets: Ownership and attitudes in the UK: Consumer survey research report

This second piece is a quantitative survey and complements the qualitative survey from Revealing Reality. It has been conducted by research agency, Kantar TNS. The survey gathers information about the cryptoassets market in the UK in order to understand the behaviours and motivations among consumers who are purchasing cryptos and to identify areas of potential risks.

According to the survey, “over 70% of those surveyed haven’t heard of cryptocurrencies or didn’t know how to define one.” Only a meagre 3% of the overall sample had bought cryptos in the past, and “only 7% of those who haven’t bought any cryptocurrencies so far would consider it in the future.” It was also surprising that, “only 8% of all cryptocurrency owners completed ‘deep research’ before purchasing, with 16% doing no prior research.” It is also interesting to see that “around 40% of cryptocurrency owners expect to hold it for 3 or more years, while half of them report selling some or all of it already.”

Bitcoin was found to be the most popular cryptocurrency, with over 50 percent purchasing it and 34 percent preferring ether (ETH).

The term cryptocurrency was mostly recognized by men, between 20-44 years old, who are from middle or upper middle class backgrounds, the survey found.

Christopher Woolard, the FCA’s Executive Director of Strategy and Competition said:

“This research gives us evidence we haven’t had before about how consumers interact with cryptoassets. This will help us ensure we are acting on evidence as we seek to protect consumers and market integrity. The results suggest that although cryptoassets may not be well understood by many consumers, the vast majority don’t buy or use them currently. Whilst the research suggests some harm to individual cryptoasset users, it does not suggest a large impact on wider society. Nevertheless, cryptoassets are complex, volatile products – consumers investing in them should be prepared to lose all of their money.”

For crypto-projects, the FCA’s attempt to examine and understand the motivations behind the purchase of cryptos in order to bring some of them within the sphere of regulatory control, is significant. Regulation will potentially protect users who are not as knowledgeable as others, while ensuring that there is a specific cryptocurrency market for sophisticated investors, who understand the potential risks and, arguably, the potential benefits.