Money Box Live: Understanding Crypto

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Hello, in today's Moneybox Live podcast, we're looking at cryptocurrencies. They are one of the biggest financial developments of the century so far. We get so many questions and queries about them in the Moneybox inbox. So today we're going to answer as many questions. We will tell you what crypto is and what it isn't. Because crypto is big. It's complicated. And when it goes wrong or there are scammers, it can really cause problems. I lost £250,000.

i lost friendships i lost dignity i lost so much more than just the money We'll be hearing more of Chris's story later in the podcast. Now, the Financial Conduct Authority says that about 12% of UK adults owned crypto in 2024. That is a pretty big jump from 2021 when the number was

just 4%. Moneybox Live's James Graham headed out to central Manchester to ask shoppers there about their attitudes to all things crypto. I'm just asking people about cryptocurrencies and whether they're involved in any way. No. No, sorry. We're not very risky people. Shortest interview. You've got no interest in getting involved? I did. We've got a friend who's really into it. When you speak to him, I'm a bit like, oh.

Does that sound easy money? But I don't know. It scares me too much. I think just to invest with not enough knowledge is a bit scary for me. My perception of it is that it's got risk attached. and therefore I'm not sure why you'd want to invest in it. I mean, I don't know that much about it, but I don't think many people in my generation were into any cryptocurrency. Bank of grandma and granddad.

I know a lot of people who are involved in that area, but us, we're not involved in that area. Is it something that you're interested in doing in the future? Well, perhaps if I have the right education and have a good know-abouts about how to do it, well, why not, yes. Well, I think my generation, especially the 20s, they have lots of interest in this.

these things but like they don't know what is is actually and they need to learn about more like and they just think like it's more like kind of a game no i'm not interested in it i see it rise and fall all the time and i think it's too much of a risk My boss recently put £80 into a new coin and his £80 is now worth something like 20 pence. I've also seen people do really well for me.

back in the day when like bitcoin was first a thing and so on and so forth but these days i think it is a very very risky business and i can't be bothered with it

Oh, the word risk coming up a lot there. Well, listening to that and joining me today to answer your questions is Kate Busherell, a digital strategy consultant specialising in emerging technologies, particularly blockchain and crypto. Kate, hello.

Hello, how are you doing? Well, I'm curious to know what you think of that because some of those shoppers talked about not knowing enough. So I'll tell you what, let's cover some of the basics. Can you give a really simple explainer of what crypto is? And bear in mind the programme has to finish at half past three.

Absolutely. I mean, it is true that people don't understand it and it's important to get a grip of what it is. So Bitcoin, everyone's heard of Bitcoin. And that was the very first cryptocurrency. And the reason it was...

It was interesting was because for the first time we had a way of recording movements of money, movements of value between people without needing a bank or somebody to actually keep the ledger. So the blockchain that sits... under bitcoin was the first proof that you could put in a transaction, you know, I've sent £5 to Felicity, and it would be recorded, it couldn't be changed, it would be totaled up at the end of a block, and then the page turned, just like an old accounting ledger.

And it was this that became exciting, the idea that you could have digital money that didn't need a bank. And then we start getting more and more and more of these currencies. And there has been a history of really, really risky stuff. And it's very true that there's things that have been going up and down as the technology has been establishing itself. But we've been evolving to the point now where we have some very, very useful...

cryptocurrencies that are running on exactly the same principle as Bitcoin did with this honest ledger that nobody can tamper with and everybody can see. So that's the basic difference between a cryptocurrency and things that we do with our banks. Okay, so sort of the big puffin book explanation would be it's a digital currency. It lives on something called the blockchain and you keep a digital wallet to keep it in. There's a lot to know. A lot of people there talked about

wanting to understand it. And you need to understand that technical side, don't you, before you invest. So how to open a wallet, how to actually trade it. How do you buy a cryptocurrency like Bitcoin? So you would normally start with an exchange. So an exchange would be something like, for example, Coinbase is a popular one in the UK. And this is a place where you can put your pounds in and buy. any of the cryptocurrencies that they list. But you've got to be aware that

It's a high-risk investment. And so the Financial Conduct Authority, the FCA, is very, very strict on who can actually do that. So there's a lot of protection for consumers. So if you don't know what you're doing, if you don't understand it... you don't pass the questions that they ask. So there is protection there as well. Well, there's not as much protection as other investments, but that might change, which we'll talk about in just a few minutes. But Kate, how do you get your money out?

of a crypto investment. In exactly the same way. So you always need to convert through an exchange. So all of these little cryptocurrencies are running on different blockchains. It's almost like the London Underground. So you're hopping onto the... Piccadilly Line crypto. And then you have to go to King's Cross in order to get the escalator back up to pound sterling.

That's a very evocative description. Okay, well, some of our listeners have already been in touch to ask what the point of it is. So this is something Adam contacted us over. Hi, Moneybox Live. when crypto was first launched all of those years ago it was touted as being another form of currency not under the fear to governments and central banks do we know how many genuine purchases are made with the like of bitcoin

Or is it really just a risky investment scheme with no protections? Adam, thank you very much. Kate. He's got a point, doesn't he? I remember a few years ago, the talk around cryptocurrencies seemed to expect that it could be eventually used, that there'll be a breakthrough and it would become a spending currency. I think there was a pizza restaurant that accepted it.

could put down a deposit on a Tesla with Bitcoin, although I think now they're only accepting Dogecoin, which was originally launched as a joke. Adam's got a point, doesn't he? It's not really being used as anything other than a speculative investment. Well... Bitcoin, I would agree. So Bitcoin's quite special. It's a bit like Stevenson's rocket. So it's historical. It runs really, really slowly. If you were to pay for your coffee with Bitcoin, it would take around up to an hour for that.

transaction to be confirmed on the ledger by which time your coffee's cold so it it is it has its place in transactions but in very very specific situations Peter's message, sorry, just address this as well if you can. Peter says, how can something be considered a currency when its value changes so quickly? It means the price of everything would change so fast. This is part of the point.

With the volatility of Bitcoin and a lot of the other currencies, they are not used themselves as currency. They are a store of value, even though they're going up and down in the same way that shares would be, for example, but it's more long term. What we're seeing now is a type of cryptocurrency called a stable coin that is emerging. And these are incredible. So they're tethered to the...

Value of another currency, another real world asset. So mainly dollars. Attached to. Attached to. So one stable coin equals one dollar in most cases or one euro or one yen. And these are huge. So the World Economic Forum says that there are 208 billion stablecoins in circulation now. They are increasing 28% year on year. And the transfer volumes last year.

$27.6 trillion worth of payments, which is more than the combined volume of Visa and MasterCard. Greg says crypto is the world's biggest pyramid scheme. There have been scams because there are always scams where there's value. So, of course, this technology has been used by scammers. But there have also been coins that have been launched and then just not really gone anywhere and people have lost their money.

Yes, there's also been stocks and shares and investments that have been launched that have gone nowhere and people have lost their money. This is a little bit more high profile because there is that reputation of all what's volatile and it's exciting and so on.

It's quite similar to early stage stocks and shares, for example. Let's bring in Louise now. Also joining us throughout the programme is Louise Abbott, a partner at Keystone Law who focuses on fraud, crypto and asset recovery. Louise, thanks for being with us. Hello. Hi there.

A lot of the people we heard from in Manchester there, they were clearly nervous of the risks of cryptocurrency. Now, we've talked a little bit about what kind of protections there are, but the FCA has just announced it's consulting on new rules for those cryptocurrencies. trading platforms that means they do have more responsibility to consumers. Can you tell us what they're considering?

Yes, of course, yes. The FCA regulates certain aspects of crypto activity already, but the current regime is more of a patchwork at present, with some focuses on consumer protection, financial crime and advertising, for example. There is now in-depth consultation and discussions around the new regime, which is going to be rolled out during the course of 2026, hopefully.

The UK is essentially taking quite a different approach to the EU, expanding the scope of the existing framework to include crypto assets rather than creating a standalone regime. So under the draft legislation... New regulated activities will be created that are similar to existing ones for traditional assets, but they will now relate to crypto assets. OK, so a bit more of those kind of traditional protections that consumers might expect elsewhere and under the consumer duty.

might now apply to these kind of crypto trades. Yes, exactly. Yeah, so from January next year, we're going to have a new reporting regime to the revenue. And then during the course of 2026, we'll see other areas of regulation rolled out, which is there, which covers a whole raft of things. cover consumer protection, market abuse, stablecoin regulation.

And we will no doubt cover all of those on Moneybox and Moneybox Live. I should say as well, the FCA said their proposals won't remove the risks of investing in crypto, but they will help firms meet common standards so consumers have a better idea of what to expect. mentioned that 12% of adults have crypto. And I suppose that's actually quite a lot for a specialist investment. Over in America, we're seeing Donald Trump

pushing to make it easier for Americans to use retirement savings, for example, to invest in cryptocurrencies. It is becoming more mainstream, isn't it? Who's actually doing it? Yes, there are lots of people investing in crypto. It's definitely here to stay. Digital assets of some shape or form are the future, in my opinion. And so people are excited by them.

they can make a lot of money and they can be very lucrative. So the kind of clients that I see range from individuals in their 20s and 30s through to... And perhaps actually those are more sophisticated investors or understand the technology slightly better. And then it's these through to people in their 50s, 60s, 70s who perhaps have... more money to invest but don't necessarily understand the crypto market. So it's a whole range of people that are attracted to these kinds of investments.

naturally promise large returns interesting that it's uh it's all ages promise large returns but obviously never no no investment does but particularly with crypto i think um one recent survey by aviva suggested a quarter of people would consider using cryptocurrency as part of retirement plans so clearly clearly across all across all ages there is hey let's talk What are you talking about?

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Undeniable, isn't it, that some people made a lot of money from crypto, especially people who invested early on. That idea, though, of getting rich quick is extremely helpful for scammers. Now, Action Fraud, which is the UK's national reporting centre for cybercrime, says crypto-related scams jumped by 16% last year. And in fact, it accounted for two... of all investment fraud reports. Let's hear from Chris now.

He lost hundreds of thousands of pounds after falling victim to a crypto scam in 2021. He got in touch with us to tell his story. And I just want to warn you that it is quite a difficult listen. I was doing a little bit of... trading myself i seen something on social media um i clicked on the link i got contacted um and it basically went from there it all started very very small very friendly, introduced to different brokers, and over a five-month period, it was built up and built up.

I was the one that was actually doing the trades, not them. I wasn't giving them my money and they were trading it. I was sat there with an account, seeing everything. all the different coins ethereum bitcoin and everything else like that and i was sat there on the computer and he would be advising me over the phone saying right buy this buy this and then leave it for a few days and you'd see it making money

I was just totally and utterly taken in. I think it's a very embarrassing thing to say, but yeah, I was suckered and I was groomed. We were swapping photographs of kids and families. all this sort of thing. And you're totally under this spell. I want to ask you, and I'm sorry to ask, but I think some people listening might question...

If it was greed that made you susceptible to this, I just wonder what your motivation was for investing. You know, if I'm brutally honest, I wanted to be able to have a life that I wanted. We wanted to get a second home. I wanted a... provide my kids my grandkids i think greed's the wrong word but you get wrapped up in in the excitement and the thrill of it it's like

taking a drug and you were just you were just so oh i was in such a good mood the thing was i wasn't keeping it to myself i was telling everybody i was trying to get everybody else in on it because i thought this is such a great deal how did you realize it was a scam that you'd actually lost all this money i tried to get some money out of my accounts and i did another trade and basically they manipulated that trade from their end and they made the trade fail

and then started losing money rapidly. And when I decided that, right, I'm going to cut my losses and try and get out with what I can, and I pressed the sell button, nothing happened. I couldn't believe it. I thought, no, there must be something. I was trying to find every excuse in the world why this wasn't happening. And then that was it. It happened. And yeah.

The feeling of the sickness and everything else. I didn't want to believe it. I didn't want to believe it for days. They still contacted me. They actually even tried to get... more money out to me. Chris, how much did you lose of your own money? So not the gains you thought you'd made, but of the cash that you had put in? Just under £250,000. Wow.

which was all my savings. I had a nice car. I sold that. Literally, as the money hit my bank, it was out. I took a bank loan out. Chris, I mean, that is a life-changing amount of money to lose. What impact has that had on your life, on your finances, on every aspect of your life? Well, massive, really.

You know, it put me in a very dark place at some stages, very dark. I had the support of some friends and my wife at the time, but it started the diamond spiral to losing my business and my marriage. I got to a place where I didn't want to be here anymore. And then I just suddenly realized how selfish I was being. So I just sort of, I just get up every morning, do what I do, trying to...

get back to where I was. But I am fortunate enough that I've got a service pension. Fortunate that I've got good friends around me who support me. But it is, yeah. The stages you go through are horrible. The feeling of shame. That's the biggest thing. You get shame, you get anger, you get the, if I ever find them things, but it's the feeling of shame. I'm so sorry.

for what you've been through and I'm so grateful to you for telling us about it and warning Moneybox Live listeners about what you've been through. I just want to ask you one last thing.

We always get emails when we speak to somebody who's been scammed. We get emails from people saying they would never fall for something like this. What would you say to them? You will. If you do not question every single thing, if it don't feel right and it feels too good to be true, it is. Before this, I would have been there, stood on my soapbox saying, there is no way you would ever catch me out doing this.

With this sort of a scam, it's not something that happens like instantly. This was over a period of five months. And we had good days where we made a lot of money and we had bad days when we lost. So it all seems so real. Huge thanks to Chris for sharing his story because he wants to help other people avoid what he went through. And if you've been affected by those issues or if you're in distress or despair and need support, including urgent support.

A list of organisations that can help is available at bbc.co.uk forward slash action line. Louise, it was hard to listen to, wasn't it? This is the kind of case that you get involved in. Chris tried actually to trace his money with the help of a law firm and he wasn't successful. We've had emails just today from people who've lost significant sums to scammers. What can anyone do in a case like that? Yeah, it's, I'm sorry.

Sorry to have heard Chris's story. Unfortunately, he's definitely not alone and I have lots of clients that... that are in very similar situations who say exactly the same as he had. And there's lots of things there that are very typical of the sort of stories I hear. In terms of...

trying to get your money back, unless your money can be traced, and obviously that's part of the advantage of the blockchain, if you can trace it, then you have every chance of recovering it. But if you can't trace it, if the money has been off-ramped, taken off the blockchain, converted back into fiat...

and effectively stolen by the fraudsters, then your chances of recovery at that stage are very low. Fiat being traditional currencies that we think of. Chris also tried to get compensation from his bank, arguing that he was groomed. Are there any circumstances where that's possible?

It's extremely rare. The obligations of banks to assist are very limited, especially if funds are transferred intentionally by the customer to a legitimate crypto exchange or wallet before they're being lost, which is... if you were convinced to try if you were sending your money to a fraudster and and the

The bank had not taken proper due care to look at where those monies were going. But if it's to a legitimate exchange or a legitimate wallet, the obligations on the bank are very limited, I'm afraid. Well, Chow has been in touch with her story. I was scammed last year. It was a crypto scam and I lost £21,000. It took some time for it to dawn on me and it was a very painful and traumatic awakening. I reported this to the police.

action fraud and to my bank, but they were not able to recoup the funds. I'm wondering if there is a window of time to be able to get back lost money. Louise, is there a specific window of time? With crypto, it's as soon as possible you need to take action. So as Chris pointed out, unfortunately, people don't often realise...

they're being scammed until the point at which they try to make a withdrawal. So what they think they see is that they're looking at an app or a computer program and they can see or they think they see their investment going in and they can see the movement of their assets.

That's generally fake and that's what the fraudster is controlling and wants you to see. So you only ever become aware of it when you try to make a withdrawal and there are difficulties. But because crypto can move at the click of a button... The quicker you instruct someone like me to try to find where those assets are, the more chance you are of catching those assets and ring fencing them before they're converted into typical currency and removed. Yes. Kate, briefly, if you can.

I suppose the thing is, in cases like this, crypto is just the shop window for the criminal, isn't it? It's not a flaw necessarily with crypto specifically. It's simply what the scammers are currently using to sell their fraud. Yes, very much. Where there is value, there are criminals. And it is very easy to move digital currency. Although, as Louise says, it is also easy to trace because the blockchain is transparent. So you can actually follow all of the transactions. Thank you.

You don't know who the people are, but it's extraordinary how many people can be traced back to the real world. And there are certainly an awful lot of very, very encouraging cases where funds that have been stolen have been... traced to the real world and there have been arrests and criminals have have paid the price which is marvellous which is always good we love that on moneybox live okay let's hear another question david from bath has been in touch to ask this

Regarding crypto, could you please discuss how to pay tax and how much? If it's too complicated or expensive, it might not be worth the risk in the first place. David, thank you very much. Kate, what is the tax treatment and when do you pay tax? It's treated like everything else that you do in your life. So in the UK, anything that's income.

is under income tax, and anything that is a gain on an investment is under capital gains tax. And that's been the case all along. I think the Inland Revenue put their first... guidance out in 2014 so they were really on the ball with this and it simply is as soon as you move as soon as you move anything to do with crypto there will be attacks and you simply record that and file it at the end of the year with your tax return. It's very, very straightforward, particularly if you use one of the...

aggregation platforms that actually gives you all that information and balances up all of your wallets. I use one called Coinly. Others are available. And this gives you a report that you can send to HMRC. Thank you. Right. Let's squeeze in. Graham has emailed.

to say I considered a 500 pound punt on Bitcoin in 2009 and could now be unbelievably rich apparently. Instead I'm scraping along but my conscience is clear because I haven't helped it damage the planet. I know you aren't bothered about that but please don't ignore the subject and calculate

not just crypto's investment value, but its colossal environmental damage. We're coming to the end of the programme, Kate, and it is a big question, but that is a big concern for many people, isn't it? Yes, and it was a concern for the original Bitcoin developers. We see original correspondence. from back in 2009, where they're saying to each other, look, if we get to the point where we've got 50 or 100,000 people getting involved...

in Bitcoin, then we're going to be using a lot of energy. And so all the subsequent creations of crypto all the subsequent blockchains have really looked very hard at how they minimise their environmental impact. So Bitcoin is Stevenson's rocket in many ways.

including the fact that it just sits there and burns coal. And all the rest are like HS2. Right, we are almost out of time. Kate, you are a must. In this whole sector, what is the key piece of advice briefly that you have for anyone considering joining those 12% of people with crypto? Learn what the individual cryptocurrencies are. what their value to...

The whole ecosystem into the world is, if you like. So you look at Bitcoin and you will see it as an investment because it is a rare commodity and it is historical. You may look at something else that is a payments platform. So learn.

about the stocks. Learn about it. Always good advice. Louise, what's your best advice? Very briefly. Thank you. I would echo that. Make sure you understand the investment you're making. Research it properly. And if you have to use a third party, please make sure they're regulated. How often do we say, do you?

your homework on Moneybox Live. But yes, very much do your homework. Thank you both very much. Well, that is all we have time for in today's Moneybox Live podcast. Thank you to everybody who's been in touch and shared their stories and questions. And thank you, of course, to our experts. been hearing from Kate Borcherell, a digital strategy consultant specialising in blockchain and crypto, and Louise Abbott, a partner at Keystone Law.

Paul Lewis is back with the Moneybox podcast on Saturday. He'll be talking about how the winter fuel payment is going to work this year for those who earn too much to keep it. If you want to get in touch about that, or if there's another story you want the team here to take a look at, then you can email us. It's moneybox at bbc.co.uk. Or on WhatsApp, you can send us a voice note or comment to 033 06 783 183.

In this podcast, the producer was James Graham, studio manager James West, the production coordinator Ema Devlin. Our editor is Jess Quayle. I'm Felicity Hanna. And this was a BBC News money and work production for BBC Sounds. From BBC Radio 4, The Fort. Royal Marines and Army pilots speaking for the first time. We felt there were Taliban fighters coming through this...

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