We have carried out research with consumers to better understand the potential harms of cryptoassets.
In October 2018, we published a joint report, alongside the Bank of England and HM Treasury as part of a UK domestic taskforce on cryptoassets.
The report set out the UK’s policy and regulatory approach to cryptoassets and Distributed Ledger Technology (DLT). Whilst we identified 3 major risks of harm associated with cryptoassets - to market integrity, of financial crime and to consumers - we also acknowledged the lack of credible evidence on consumers’ usage in this rapidly-evolving market.
We, therefore, commissioned 2 pieces of complementary research.
The first, produced by research firm, Revealing Reality, explores the attitudes, understanding, motivations and beliefs that underpin people’s decisions to purchase and use different cryptoassets through qualitative interviews. The researchers spoke to 31 cryptoasset consumers, asking them to share their motivations and sources of information. 17 consumers were then selected for follow-up interviews. We summarise their key findings below.
We also commissioned Kantar TNS, in December 2018, to survey a nationally representative sample of 2,132 UK consumers. They were asked high-level questions regarding their awareness, understanding and purchasing habits related to cryptoassets.
What we found
Many consumers see cryptoassets as a fast-track to easy wealth
Consumers purchasing cryptoassets are often looking for ways to ‘get rich quick’. Many of those interviewed by the Revealing Reality researchers perceived cryptoassets as a shortcut to easy money and wealth. They often cited influence from others, including social media, as motivation for investing.
Many consumers may not fully understand what they are purchasing
Revealing Reality found many consumers overestimated their knowledge of cryptoassets. Several of those interviewed talked of wanting to buy a ‘whole’ coin, not realising that they could buy just part of one.
Many consumers seemed to have a sense that they were investing in tangible assets, due to the language and imagery associated with cryptoassets, such as ‘mining’ and ‘coin’.
There are signs that cryptoassets are accompanied by risky behaviours
Consumers’ initial engagement with cryptoassets is often prompted by the advice of a few, influential recommendations. However, many told the qualitative researchers that they were distrustful of mainstream media or official sources of information.
Often consumers don’t complete due diligence prior to purchasing. Several consumers interviewed told Revealing Reality that they hadn’t completed much, or any, research on cryptoassets. Similarly, the Kantar TNS survey found (amongst a much smaller sub- sample) that 1 in 6 consumers don’t complete any research prior to purchasing cryptoassets.
Some consumers are aware of risks, including price volatility. But some even say that risk is part of the attraction. Many don’t appear to have any strategy to sell their assets or a sense of what would motivate them to do so.
Anecdotal evidence may overstate harm
Only a small minority of UK consumers have bought cryptoassets and many do not understand what they are. We estimate that only 3% of those surveyed had ever bought cryptoassets, and 73% of UK consumers don’t know what a 'cryptocurrency' is or are unable to define it. The term is most recognised by men aged 20- 44 years old and in the AB social grade (i.e. middle class and upper middle class).
Consumers generally don’t spend much on cryptoassets and they tend to use their own money. Our survey indicated that, amongst a small sub-sample, around half of those who buy cryptoassets spend under £200. Most use their own disposable income - none of those we surveyed within the sub-sample, said that they borrowed money.
Most consumers who haven’t bought cryptoassets to-date aren’t likely to do so. Of those who had never bought cryptoassets, only one in 100 people told us that they would definitely buy in the future.
About the research
The research provided a wealth of information about consumers’ attitudes and motivations in relation to cryptoassets, but is exploratory in nature rather than conclusive. Whilst Kantar TNS surveyed 2,132 UK consumers, only a minority of those were able to correctly identify what a 'cryptocurrency' is. The number of consumers who reported buying cryptocurrencies was much lower (51) – we should, therefore, be careful with the inferences we draw from these sub-samples.
We used the term 'cryptocurrency' for the purposes of the survey as the term is more widely used. Otherwise, we generally prefer to use the term 'cryptoasset'.
This consumer research is part of a series of initial pieces of work on cryptoassets, continuing our work in this area as outlined originally by the UK Cryptoassets Taskforce. We have recently published the Cryptoassets Perimeter Guidance Consultation (open for responses until 5 April 2019) and will publish a consultation on a proposed ban of certain cryptoasset derivatives to retail investors later this year.
See our information for consumers on the risks of investing in cryptoassets.
See more on our approach to cryptoassets.