In the previous article in this series —using insights gathered from our survey of 1,000 people in the UK— we explored the basics of cryptocurrency for small and medium enterprises (SMEs) and revealed some data on how consumers in the UK choose to use it. In part two, we examine people’s attitudes in more depth, including whether they trust cryptocurrency and to what extent. You can find the full methodology for the survey at the end of this article.
The topic of cryptocurrency is especially relevant for SMEs in the UK. While few businesses accept payment in cryptocurrency right now, our research shows that it is gaining popularity as a store of value. Consumers can already use crypto to pay on eCommerce platforms like Shopify. Understanding these trends now will help businesses track and plan for future developments.
Cryptocurrencies (also known as ‘crypto’ for short) allow you to pay for goods and services just like real (‘fiat’) currencies, but they only exist digitally and are not controlled by a central bank. There are more than 6,500 cryptocurrencies, but some of the best-known include Bitcoin, Etherium, and Litecoin. Coins can be kept safe in a cryptocurrency wallet and are bought and sold on crypto exchanges. These work just like regular currency exchanges, where people aim to make a profit by predicting rises and falls in the currencies’ value.
How popular are cryptocurrencies in the UK?
Cryptocurrency is a relatively popular form of investment among the people we surveyed. In total, 21% have bought or used crypto in the past, and another 34% plan to do so. 22% say they invest in cryptocurrency, which is just below the number who invest in securities (stock, bonds, and derivatives —29%), and well above the proportion who invest in real estate (13%).
Perhaps because of its short history and exclusively digital presence, cryptocurrency is more popular with younger respondents than older ones. This is evident in higher usage and trust levels among younger people. For example, 33% of under 35s said they have bought or used cryptocurrencies compared with just 14% of over 35s. This trend recurs throughout our survey.
Why is cryptocurrency so popular right now?
As we saw in part one, a major draw for cryptocurrency is the ability to make money by speculating on its fluctuating value. These dramatic rises and falls continue to make headlines: Bitcoin, for example, hit a record high price in October 2021.
The COVID-19 pandemic seems to be further fuelling this interest. 82% of those who use or buy crypto started doing so in the last two years. Of all the respondents who are interested in crypto (i.e. those who already use it or plan to), 53% say that this interest began during the pandemic.
When asked how the pandemic changed their crypto buying or usage behaviour, many (38%) said that it gave them more time to do research. 28% said their interest grew because other people were buying currency, and 23% said their interest grew because of the positive projections for a specific currency.
The near future looks positive, too. Most people who plan to use cryptocurrencies say they are likely to buy in the next five years. 67% rate their chances as ‘somewhat’ or ‘very’ likely. 18% plan to buy in the next six months, 31% say they will do so at some point between six months and a year, and 29% plan to buy in one to two years.
How much are people investing in crypto?
Cryptocurrencies are an attractive investment for many people, although the volatility makes them unpredictable. As we saw in part one, the chance to make money despite the risk of losing it was the most attractive feature of cryptocurrency, appealing to 60% of users.
Among our respondents, around half of people seem to be dedicating 10% or less of their investment portfolios to buying and trading cryptocurrencies.
Around two-thirds of the people we spoke to are happy with their crypto investments, too. In total, 65% say they are ‘a little’ (42%) or ‘very’ (23%) satisfied, compared with 2% who are not satisfied.
Do UK consumers trust cryptocurrencies?
To see how much people trust cryptocurrencies, we asked them to rate their levels of trust in using crypto for a range of financial tasks and compared that to people’s level of trust for banks across those same activities. For all 1,006 respondents as a whole, banks rated far more highly. For all five activities (national peer-to-peer money transfer, international peer-to-peer money transfer, secure online payments, secure loans, and trading) the plurality said they ‘neither trust nor distrust’ cryptocurrencies. By contrast, the plurality ‘strongly trust’ banks in every scenario except trading, where the dominant opinion was ‘neither trust nor distrust’ for both cryptocurrency and banks.
Just over half of respondents overall (53%) believe that trade in cryptocurrencies should be regulated by the state or other institutions. A similar proportion (56%) are ‘somewhat’ or ‘very’ concerned that cryptocurrencies are used for illegal activities.
SMEs may consider crypto to be an attractive prospect. By accepting payment in alternative currencies, they can stand out as an innovator at a time when few small businesses offer this.
But there is a darker, hidden side. Cryptocurrencies are often the payment method of choice for online marketplaces where illegal goods —including drugs, weaponry, and stolen credit card information— are traded. Online criminals favour crypto because of its anonymous nature, meaning that payments are hard to track. This also makes it popular among ransomware gangs who use malicious software (malware) to effectively lock down people’s computers and data, only releasing it once they receive a ransom payment in cryptocurrency.
Younger respondents show more trust towards cryptocurrency overall. 41% of under 36s think crypto should be state-regulated compared with 59% of respondents aged 55 and above, for example. And 49% of under 36s are ‘very’ or ‘somewhat’ concerned about crypto being used for illegal activities versus 60% of the 55 and over group.
What is a CBDC?
A central bank digital currency (CBDC) is similar to cryptocurrency in that it exists only digitally and can be used for online payments, but unlike crypto, CBDCs are regulated by a central bank. In April 2021, the Bank Of England announced a taskforce to explore this area, although interest in and awareness of CBDCs was fairly low among the people we surveyed.
When asked if CBDCs would be a good thing either personally or to the economy in general, 51% said they don’t know, and 23% said no. Around two-thirds (66%) have some concerns about CBDCs, including:
- Privacy concerns (‘they could track all my movements directly’) —16% of respondents.
- Authority concerns (‘the state can control it like with fiat currency’) —20% of respondents.
- Security concerns (‘the platforms could being hacked and the money stolen’) —30% of respondents.
Perhaps the defining verdict on the issue comes from the final question in our survey. For now, at least, fiat money will be the preferred currency of 40% of respondents in five years’ time, beating crypto (17%) and CBDCs (13%).
- Around one in five people we surveyed use cryptocurrency, and it is more popular with younger respondents.
- Usage has increased in the last 2 years, and the pandemic has given people more time to research the topic.
- People are investing around 10% of their money into crypto, and are broadly happy with their investments.
- However, overall trust of crypto (and central bank digital currencies) is low, with a distinct split between younger people (who trust it more) and older ones (who are more sceptical).
To collect the data for this report, we conducted an online survey on Cryptocurrency in October 2021. Of the total respondents, we were able to identify 1,006 UK respondents that fit within our criteria:
- UK resident.
- Over 18 years of age.
- Are either aware of or familiar with Cryptocurrency (respondents said they are at least ‘a bit familiar’ with cryptocurrency and could define what it means by selecting the correct definition from a choice of three.)
NOTE: This article is intended to inform our readers about business-related concerns in the United Kingdom. It is in no way intended to provide financial advice or to endorse a specific course of action. For advice on your specific situation, consult your accountant or financial consultant.