The collapse of several crypto firms, including FTX, has left retail investors with huge losses over the past year. This development has prompted regulators around the world to pay more attention to the regulation of crypto assets. New regulations in the United Kingdom have prompted payment service provider PayPal to temporarily stop buying cryptocurrencies for British customers.
• PayPal expanded crypto service for UK customers in 2021
• PayPal’s cryptocurrency sales paused due to stricter Financial Conduct Authority rules
• Need for action in the regulation of high-risk crypto assets
PayPal wants to expand its international offering
As part of its expansion plan, PayPal expanded its crypto service internationally for UK customers for the first time. Since September 2021, British customers of the US online payments giant have been able to buy, hold and sell all supported cryptocurrencies directly via their PayPal account. According to PayPal, the transactions can be carried out from an amount of one pound.
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Stricter rules for crypto assets
Starting October 1, PayPal will temporarily pause the sale of cryptocurrencies in the UK until early 2024. The company announced this in an email to customers, as reported by the international news agency Reuters. Until PayPal releases the purchase function again, customers can still sell and hold their coins.
This measure is a direct response to the stricter rules of the Financial Conduct Authority (FCA) – the country’s financial regulator, to which PayPal referred in the email to customers. According to Reuters, the exact wording is as follows: “PayPal consistently works closely with regulators around the world to comply with applicable rules and regulations in the markets in which we operate.”
According to an official statement on the FCA’s website, the newly introduced rules will oblige crypto companies in the UK to publish clear risk warnings and give their customers a 24-hour cooling-off period before purchasing crypto assets. “Refer a friend” bonuses for crypto buyers are also excluded. The newly implemented measures are intended to ensure that advertising is transparent, fair and free of misleading information. According to news outlet CoinDesk, the payments giant is now working to make the necessary changes to restart crypto trading in the UK.
Current research shows a need for action
FCA research shows a significant increase in cryptocurrency ownership. The regulator reported that in 2022, nearly 10 percent of people surveyed owned some form of crypto — more than double the number from the previous year.
In a press release, Sheldon Mills, executive director of the FCA’s consumer and competition division, emphasized the importance of people making informed decisions when investing in cryptocurrencies. He pointed to recent research showing that many people regret investing impulsively. Mills stressed that crypto assets are largely unregulated and “inherently high-risk investments,” which is why the FCA’s cautious stance is to be endorsed.
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