Cryptocurrency: What you need to know

Cryptocurrency is often mentioned in the media, making headlines for a variety of reasons. But while it can be hard to avoid, it can also be difficult to understand.

As financial planners, we have a fiduciary duty to act in the best interests of our clients, and collectively, it seems there is some caution over cryptocurrency. Indeed, a survey by CoinShares discovered that 62% worry that recommending it might breach their fiduciary duty.

While cryptocurrency can feel like an emerging phenomenon you can simply ignore, it’s a good idea to have at least some basic knowledge of what it’s about. It’s not an asset class we at HarperLees – and indeed many other financial planners – would tend to recommend.

However, it would be remiss to not acknowledge cryptocurrency as an emerging asset class. To which end, we thought it would be beneficial to offer this guide as an educational tool. Read on to discover more about what cryptocurrency is, and how it works.

Cryptocurrency is a digital asset, with its value measured through supply and demand

Cryptocurrency is a type of digital asset, in the form of “tokens” or “coins”, that you can buy using standard currencies, such as pound sterling. For reference, the main four asset classes investors generally choose are shares, bonds, cash and property.

It has to be “mined”, which means using specialist computers to perform complex mathematical equations in order to secure transactions and create new coins. These are then added to the “blockchain”, a shared digital ledger that records all transactions and tracks assets.

There are various types of cryptocurrency. Bitcoin is the first and the most commonly traded. Other types of cryptocurrency are collectively known as “altcoins” and include ethereum, litecoin, ripple, and tether.

The difference between cryptocurrency and other asset classes is that you’re not investing in the same way. Rather, it’s a speculation over supply and demand, which is what determines the value of cryptoassets.

This means that it can be volatile, with large swings in prices often created by simple activity. According to Fidelity, the price of a bitcoin can rise or fall by 10% in a single day.

At the time of writing (15 July 2025), bitcoin was worth £86,937.46, down by £2,275.96 in the past 24 hours, a fall of 2.55%.

Adoption or non-acceptance of cryptocurrency can also affect its value. The BBC reported that a single tweet from Elon Musk in 2021 declaring that Tesla would no longer accept bitcoin for vehicle purchases saw the value drop by 10%.

Proposals are underway for increased protection, regulation and legislation for cryptocurrency.

Until recently, cryptocurrency has not fallen under government regulation. While this means it has been free from intervention and interference, it also means there has been a lack of protection for investors, which could leave them vulnerable.

Indeed, one of the reasons cryptocurrency hits the headlines is due to large amounts of associated criminal activity and fraud.

However, the UK government is looking to change this. According to gov.uk, the chancellor has announced that draft legislation has been drawn up to offer clearer rules and greater protections for cryptocurrency investors, in order to boost confidence. She has also announced talks with the US to support the use and responsible growth of digital assets.

The proposed new rules would see increased support for legitimate innovation, at the same time as weeding out more spurious activity.

This would mean bringing cryptocurrency in line with more traditional financial legislation, including clear standards on transparency, consumer protection, and operational resilience. The Financial Conduct Authority, the main financial regulator in the UK, takes the position that protecting consumers and mitigating risk is key, at the same time as supporting potentially beneficial technology and upholding market integrity.

This will be welcome news for those seeking to invest in cryptocurrency. FTAdviser reports that Action Fraud had received 25,843 reports relating to investment fraud in 2024. Cryptocurrency was the most common asset fraudsters claimed to be investing in, accounting for 66% of all reports.

Cryptocurrency uses a huge amount of energy, so is not a “green” investment

While regulation is catching up with this new type of asset, there are still concerns associated with cryptocurrencies.

For example, there are certain sustainability issues associated with cryptocurrency that may also be off-putting to investors. The blockchain technology used for the mining process uses a huge amount of energy, resulting in high carbon emissions.

According to Statista, the average energy consumption for a single bitcoin transaction could equal that of hundreds of thousands of Visa transactions.

The Crypto Climate Accord (CCA) is taking steps to mitigate this, working with key players in the industry to decarbonise cryptocurrency and set new standards. These include developing 100% renewably powered blockchains, and achieving net-zero emissions from energy consumption.

Another concern is that spending cryptocurrency is not particularly easy, so it’s hard to treat these assets in the same way as cash. Only a few retailers currently accept it as a type of payment. Generally, that means your cryptocurrency assets need to be either stored or sold.

It is gradually starting to make its way into more transaction options, but is yet to be a truly practical spending choice.

Get in touch

We’re always happy to talk to you about diversifying your portfolio, and if there’s anything more you’d like to know about cryptocurrency, do please get in touch.

You can email us at info@harperlees.co.uk or call 01277 350560 to find out more, and we’ll be very happy to help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Crypto assets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws and are not suitable for the majority of investors.