Crypto-assets from a consumer protection perspective
Produced in partnership with Puesan Lam and Tony Katz of DLA Piper UK LLP
Crypto-assets from a consumer protection perspective

The following Financial Services guidance note Produced in partnership with Puesan Lam and Tony Katz of DLA Piper UK LLP provides comprehensive and up to date legal information covering:

  • Crypto-assets from a consumer protection perspective
  • What are crypto-assets?
  • Risks to the consumer posed by crypto-assets
  • Consumer protection mechanisms
  • International approach to consumer protection in relation to crypto-assets
  • FCA and BoE activity in relation to crypto-assets
  • How might things be improved for consumers?
  • How can consumers protect themselves?

What are crypto-assets?

One of the hurdles in relation to understanding non-traditional currencies and assets lies in the inconsistent use of language. Regulators and tax authorities, as well as commentators, refer variously to digital currencies, virtual currencies, cryptocurrencies, crypto-assets and crypto tokens, and it is not always clear whether they are using the terms interchangeably or with the specific meaning of each in mind. For more information about how these terms are defined, see Practice Note: Crypto-assets—essentials.

In this Practice Note, the term ‘crypto-asset’ is used as a generic term for cryptocurrencies, virtual currencies, virtual assets or digital tokens. This Practice Note provides an overview of the key risks for consumers from crypto-assets, the current protections available and potential improvements that can be made to the regulatory regime.

Risks to the consumer posed by crypto-assets

Lack of regulatory protections

A number of consumer protection issues arise from the use of crypto-assets. As the European Banking Authority (EBA) has warned, consumers who have bought crypto-assets through an exchange platform may lose their money if that exchange platform is hacked and subsequently goes out of business. There is no legal protection offered for losses arising from funds held on these exchange platforms. A similar warning has been issued by the Financial Services Compensation Scheme (FSCS). The US Consumer Financial Protection Bureau