The Financial Services Compensation Scheme (FSCS) has found that while 91% of consumers with savings or investments have heard of cryptocurrencies, only 11% said they have a good understanding of how they work.
The findings also revealed that 27% of consumers who are aware of cryptocurrencies either are already investing in them or would consider doing so.
Almost a third (30%) who have heard of cryptocurrencies believe that these are driving innovation in the financial services industry – rising to 64% of those who are already investing in them. Nearly a quarter (23%) said they would consider getting into debt to buy cryptocurrencies.
Jonathan Pallant, head of stakeholder and public affairs at FSCS, said “While investing in cryptocurrency does not come with FSCS protection, the terms ‘cryptocurrencies’ and ‘FSCS protection of crypto investments’ are right at the top of the most searched for items on our website.”
He added: “The UK government is developing its ambition to make the UK a global ‘crypto hub’, with HM Treasury launching an open consultation in February 2023 on the ‘Future financial services regulatory regime for cryptoassets’. Therefore, it is important that there are sector-wide conversations on this subject.
“At FSCS, we are contributing to the discussion with our insights, to try to support the best policy outcomes for all our stakeholders. Equally, having more data enables us to respond with timely information to inform the work of FSCS, our regulatory colleagues and the government.”
Young Brits attracted to crypto
In other news, according to research published by The Association of Investment Companies (AIC), young non-investors between 20 and 40 are most aware of cryptocurrency as an investment option.
It revealed that 70% are aware of cryptocurrency such as Bitcoin, ranking well ahead of individual stocks and shares (59%), premium bonds (49%), bonds (43%), investment funds (23%), forex (21%), investment trusts (18%) and investments through crowdfunding platforms (also 18%).
More than half (57%) of young people said that the biggest barrier to investing is their lack of understanding and knowledge. The cost-of-living crisis is the second greatest hindrance to investing say (53%), followed by not having enough money in general to start investing (45%), being worried about markets or the economy at the moment (39%) and being worried that investing is generally too risky (30%).
Young people described their emotions around investing as cautious (54%), worried (41%), confused (39%) and stressed (25%). The two positive emotions identified by non-investors were interested (43%) and excited (16%) – although only 12% of women were excited in comparison to 32% of men.
Annabel Brodie-Smith, AIC communications director, said: “Some of us may find it shocking that young people are most aware of cryptocurrency as an investment option. But this demonstrates that the investment industry needs to do more to help young people understand the range of investment options, the risks involved and how investing can help them save for the future.
“Lack of knowledge is the biggest barrier to young people investing but the cost-of-living crisis comes a close second. Clearly, these are challenging economic times and an increase in salary is the key catalyst to encourage people to invest with help from a financial adviser coming second.
“It’s really encouraging that young people want to find out more about investing. We need to help them by providing clear information that’s easy to understand online and on social media.”
‘Glorified gambling’
When asked to describe their views about investing, in the course of the AIC research, one investor said: “It is like glorified gambling, you put money into shares without knowing if it will go up or down and you could even lose that money forever if it goes bust.”
Another commented: “Given the state of the world at the moment, I am uncomfortable investing, it’s too risky, my dad has already lost a large total in his pension.”
However, the findings also showed that just over four-fifths (81%) of young people are interested in finding out more about investing now or in the near future. Just over a third (34%) of all respondents have considered investing but don’t feel confident enough to start.
When asked what would encourage them to start investing, an increase in salary (58%) and help from a financial adviser (46%) were the top catalysts referred to. Winning the lottery came third (43%), followed by a recommendation from someone they know such as family or friends (41%), more information on the benefits of long-term investing (38%) and inheriting money (33%).
Traditional media still has a role
The survey also identified that most young people look online for information on money and finances.
Googling or an online search was the most popular way of finding out more (40% of respondents), alongside Instagram (19%), YouTube (18%), websites in general (13%), Facebook (13%), Twitter (8%), TikTok (8%), LinkedIn (4%) and Reddit (4%).
Over a quarter of respondents (28%) said they go to friends for information on money and finances, 20% ask their parents, 23% ask other family members and 7% quiz their colleagues.
Traditional media still has a role for young people researching money and finances too, according to the research. The findings revealed that over a fifth (22%) of respondents read the finance sections of newspapers and the same proportion (22%) read books.
