According to the UK regulator, young people have the erroneous belief that they will be bailed out if their cryptocurrency investments go wrong. The regulator’s view is that these young people are being pressured into purchasing high-risk products that will not be suitable for them.
With the best available Isa savings rate of 0.86%, and a predicted inflation rate of at least 5% by December, that will simply destroy the purchasing power of their pounds held in the bank, young people are desperately casting around for somewhere to park their wealth where it can make some returns.
The stock market has been the traditional sector for making some above inflation gains. According to Goldman Sachs data, the UK stock market has returned an average of 9.2% over the last 10 years.
However, for most young people, the stock market is not an easy place to invest. Third parties charge high fees for trades, but on top of that, it’s seen as a playground for older people and it just isn’t an area that interests them.
It could very easily be argued that the stock market is also a very dangerous place for a young investor – who would advise a young person to put their currency into a market that is surely near the very top of its cycle?
The Financial Conduct Authority (FCA) isn’t advising a foray into the stock markets, but it is suggesting that UK investors should put their money into properly regulated investments (such as an Isa) because they will have the comfort of knowing that should it fail then they will be protected by up to £85,000 of their investment.
What the FCA doesn’t tell you though is that if there is a systemic failure across more than a couple of banks at one time then the bail-out fund will not be able to cover what it is supposed to.
As far as cryptocurrencies are concerned, there are certainly very many of them that are unsuitable for anyone, let alone young investors. The shame is that young investors are being drawn to certain ‘meme’ coins that are just hype and air, and it must be said, these are among the cryptocurrencies that are given credence, especially on TikTok.
Nevertheless, there are ‘safer’ cryptocurrencies such as Bitcoin and Ethereum, and if the investor should do their homework, quite a few others that have the potential to bring a good return on investment.
The FCA operates independently from the UK government. It gets its funding by charging fees to those in the financial services industry. Therefore, it has a vested interest in seeing the continuation of a system that now only serves the big banks and institutions from the traditional financial system.
While the FCA may have an excellent understanding of the existing financial system, it will very likely have an incredibly poor understanding of the cryptocurrency sector. Other regulatory authorities are having this same problem.
It might be suggested that the FCA be made into a completely unbiased organisation that gets its funding solely from the UK government. It might also be suggested that it consult deeply with experts from the crypto sector, and that it hires one or two of them so that it can keep abreast of new developments.
As it stands, to be advising young British people to put their money into poorly performing instruments that are enmeshed in a traditional financial system on the brink of total ruin, is just not acceptable.
To also use their funding to go after young investors on TikTok and YouTube is a matter for worry and concern. With the chair of the SEC Gary Gensler also suggesting that young college students in the US save their fiat, a massive sea change is badly needed in these organisations.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
