UK to Ban Crypto Purchases with Borrowed Funds
UK Preparing to Ban Consumers from Buying Crypto with Borrowed Funds
The UK government is preparing to introduce a sweeping ban on the use of borrowed funds to purchase cryptocurrencies in what could be one of the most significant crypto-related consumer protection policies to date. The move comes amid a surge in digital asset valuations following Donald Trump’s election victory, which has reignited retail enthusiasm and alarmed regulators.
Sources close to the Financial Conduct Authority (FCA) say the proposed ban would prohibit the use of credit cards, margin accounts, and unsecured personal loans to invest in crypto. The intention is to prevent consumers from overleveraging themselves during a period of heightened volatility and speculative frenzy.
Trump Surge Sparks Regulatory Jitters
Since Trump’s return to office, the price of Bitcoin has surged past $95,000, with Ethereum and other major coins not far behind. The market reaction, fuelled by expectations of less aggressive crypto regulation in the US, has spilled over into the UK, prompting fresh retail inflows into digital assets.
But with that momentum comes risk. According to FCA internal briefing papers leaked to the Evening Standard, regulators fear that unsophisticated investors are piling into crypto on borrowed money, lured by social media hype and hopes of quick profits.
“We’ve seen this scenario before in 2021 and even in 2017,” said one city analyst. “The fear is that ordinary people will take out loans to buy tokens that collapse within weeks.”
How the Ban Would Work
The proposed rules would:
- Ban credit card companies and lenders from processing transactions linked to crypto exchanges or wallet services.
- Require platforms to block transactions linked to unsecured debt.
- Apply only to retail consumers, not institutional or business accounts.
- Mirror similar restrictions imposed on gambling transactions in the UK.
The FCA is expected to launch a formal consultation period in Q3, with legislation potentially introduced by early 2026.
Industry Reaction Mixed
Crypto advocacy groups have criticised the proposal as paternalistic, arguing that consumers should retain the right to manage their own risks. Others warn it could push UK-based traders to offshore platforms, where safeguards are weaker and scams more prevalent.
Still, some in the fintech sector welcomed the news. “This kind of regulation is long overdue,” said Arvind Sen, compliance director at a UK-based crypto exchange. “It brings crypto in line with traditional financial instruments.”
The Bigger Picture
The UK is striving to balance its role as a hub for digital innovation with safeguarding vulnerable consumers from speculative excess. While this latest proposal may be controversial, it reflects a growing international trend toward more robust crypto oversight even as prices rise.
Currently, investors who are considering investing heavily in cryptocurrency using borrowed funds may want to reconsider their decision. The regulator's tolerance is diminishing.
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