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The head of the UK financial watchdog said too many young people invest in crypto assets such as Bitcoin instead of equities or bonds, flagging this as an example of the problems its new strategy is designed to tackle.
Nikhil Rathi said millions of people aged under 35 had made their first investment in cryptocurrencies, on which “there is a very high risk that you could lose all your money”.
The Financial Conduct Authority chief executive told MPs on Tuesday that the number of British people owning shares directly was “significantly lower” than in the US, where 38 per cent hold equities, or in Sweden, where it is more than 20 per cent.
Helping consumers to invest more in equity or bond markets to achieve higher long-term returns was one of the four key objectives the FCA on Tuesday presented as part of its new five-year strategy.
One metric the FCA will use to measure its success is if there is an increase in the proportion of consumers with more than £10,000 of investible assets holding “mainstream investments” by 2030.
“One thing I think is not great is the sheer number of under-35-year-olds for whom the financial product that they invest in first is crypto — several million in the UK — rather than equities or debt or other types of products,” Rathi told MPs on the Treasury select committee.
UK crypto markets are largely unregulated except for a requirement for firms to register with the FCA that they comply with anti-money laundering rules. The government plans legislation to create a regulatory regime for crypto companies.
Last year the FCA estimated 12 per cent of UK adults owned crypto assets, equivalent to about 7mn people, with men aged under 35 the most likely to borrow money to do so, based on a YouGov survey of almost 2,200 people.
“We have also evolved a particular approach to risk and compensation in the UK, which perhaps isn’t matched in other parts of the world,” Rathi said adding this was “not all on the FCA”.
The UK’s low level share ownership was due to “a mix of tax, education, regulation and broader culture in our country” he added.
The FCA, which has in the past been criticised for stifling innovation and investment, committed to “deepen trust, rebalance risk, support growth and improve lives” with its new strategy, which received a cautious welcome from the City.
The regulator said it would make greater use of technology such as artificial intelligence to be “more efficient and effective”, while also supporting economic growth by enabling investment and innovation.
Cracking down on financial crime and wrongdoing would also be an FCA priority to boost trust in the sector, it said, adding that it would focus “on those who seek to use the fact they are regulated to do harm”.
Chris Hayward, policy chair at the City of London Corporation, welcomed “the FCA’s initiative to spark a vital debate on risk and growth appetite within the sector”. Association of British Insurers director-general Hannah Gurga said the watchdog’s new strategy “sets a positive direction for the future of regulation”.
The FCA said earlier on Tuesday it would streamline its rules by “retiring” more than 100 pages of regulations covering consumer finance, investments and mortgage lending.
The simplification of the FCA’s rule book, which runs to more than 10,000 pages, comes after chancellor Rachel Reeves announced a “radical action plan to cut red tape” to lower the cost of regulation for business by a quarter.
The watchdog said it planned to withdraw hundreds of supervisory publications and was reviewing its “prescriptive disclosure rules” to give firms more flexibility in areas such as online transactions.
Other areas under review include requirements for asset managers to report annually on whether their fees are justified, disclosure rules on credit advertising and the need for insurers to apply UK rules to overseas customers.
However, consumer groups fear the regulator risks cutting key safeguards. “The general direction of travel is worrying,” said James Daley, head of research group Fairer Finance. “The FCA is clearly under pressure to demonstrate that it is taking action to reduce the burden of regulation — but many of these proposals would be a step backwards.”
