Though cryptocurrencies have seen a significant rise in popularity, formal financial organizations are still skeptical about the asset class due to its high volatility and the regulatory attention it has received.
A Reuters Opinium poll carried out among Independent Financial Advisors (IFAs) in the UK on Wednesday reported that about 9 in 10 IFAs would strongly advise their clients not to invest in cryptocurrencies. The poll suggested that over 90% of IFAs would never advise their clients to invest in cryptocurrencies and an even greater 95% will strongly advise against meme stocks.
Although the poll also suggested that there has been an increased interest in cryptocurrencies by IFAs, their current position can negatively affect cryptocurrency investments in the UK.
Meme stocks, stocks whose values increase due to social media users’ attention, and retail investors favoring them, have recently seen big jumps. The shares of GameStop Corp., an American video game, consumer electronics, and gaming merchandise retailer headquartered in Texas, the largest video game retailer worldwide, is one such meme stock. The stock saw an exponential rise in its value after it began receiving attention on Reddit.
Despite the criticism of IRAs to cryptocurrencies, a recent poll conducted by AJ Bells, a public limited company that provides investment and stockbroker services online, found that the majority of adults in Britain prefer investing in Crypto to stocks and shares. AJ Bells’ financial analyst, Laith Khalaf, says he concludes “the world has gone crypto crazy” as more people were interested in buying crypto than investing in the stock market.
They credit the rise in investments to be attributable to the pandemic lockdown which increased savings during the period. In their poll, 71% of those that bought cryptocurrencies said they made a profit, 12% said they made a loss, while 17% of those asked said they were unsure whether their cryptocurrency investments were in the black or red. Khalaf calls for more vigilance from crypto investors saying: “Even those who have made money shouldn’t be complacent about the risks inherent in cryptocurrencies, as profits can be quickly wiped out by extreme price swings.”
Meanwhile, there have been calls for greater crypto adoption in the UK. Charlotte Crosswell, former chief executive of Innovate Finance, the industry body representing the UK FinTech sector, has said the UK needs to take steps to ensure it emerges as a thought leader in cryptocurrency regulation.
In her opinion, which she shared in a public interview hosted by the Centre for the study of Financial Innovation, she stated that she thinks there is an opportunity for this to happen, if stakeholders including the Bank of England, which plans to launch Central Bank digital currency (CBDC), and customers come together.