Do cryptocurrency investors in the UK need more protection?
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 22 January 2024
Issue publication date: 3 April 2024
Abstract
Purpose
The existing literature offers various perspectives on integrating cryptocurrencies into investment portfolios; yet, there is a gap in understanding the behaviours, attitudes and cross-investment links of individual investors. This study, grounded in the modern portfolio theory and the random walk theory, aims to add empirical insights that are specific to the UK context. It explores four hypotheses related to the influence of socio-demographics, digital adoption, cross-investment behaviours and financial attitudes on cryptocurrency owners.
Design/methodology/approach
This study uses a logistic regression model with secondary data from the Financial Lives Survey 2020 to assess the factors impacting cryptocurrency ownership. A total of 29 variables are used, categorized into four groups aligned with the hypotheses. Additionally, hierarchical clustering analysis was conducted to further explore the cross-investment links.
Findings
The study reveals a significant lack of diversification among UK cryptocurrency investors, a pronounced inclination towards high-risk investments such as peer-to-peer lending and crowdfunding, and parallels with gambling behaviours, including financial dissatisfaction and a propensity for risk-taking. It highlights the influence of demographic traits, risk tolerance, technological literacy and emotional attitudes on cryptocurrency investment decisions.
Originality/value
This study provides valuable insights into cryptocurrency regulation and retail investor protection, underscoring the necessity for tailored financial education and a holistic regulatory approach for investment products with comparable risk levels, with the aim of minimizing regulatory arbitrage. It significantly enhances our understanding of the unique dynamics of cryptocurrency investments within the evolving financial landscape.
Keywords
Acknowledgements
The author thank the anonymous peer reviewers for their insightful comments and suggestions that improved his manuscript’s quality. She is also grateful to her PhD supervisors, Prof David Aikman and Dr Ylva Baeckström, for their encouragement and guidance.
Funding: This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.
*The data for this research was provided by the Consumer Data Research Centre, as an ESRC Data Investment, under project ID CDRC 989-01, ES/L11840/1; ES/L011891/1.
**The views expressed in this paper are the author’s alone and do not necessarily reflect the views of her institution and/or employer.
Citation
Wang, Y. (2024), "Do cryptocurrency investors in the UK need more protection?", Journal of Financial Regulation and Compliance, Vol. 32 No. 2, pp. 230-249. https://doi.org/10.1108/JFRC-03-2023-0036
Publisher
:Emerald Publishing Limited
Copyright © 2024, Emerald Publishing Limited