More than 70 per cent of UK consumers do not know what a cryptocurrency is, new research has found, as the City watchdog warned that crypto investors should be prepared to lose all their money.

The term cryptocurrency, which is a digital or virtual currency that uses cryptography coding for security, is understood by 29 per cent of Londoners, slightly above the 27 per cent UK average.

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Some crypto asset owners made their investments without completing any research first and cited “getting rich quick” as the main motivation for investing, research by the Financial Conduct Authority (FCA) found.

However, only three per cent of the 2,132 consumers surveyed by the FCA had ever bought crypto assets and half of that number had spent less than £200.

More than half of crypto investors favoured Bitcoin, the FCA survey found, while one in three chose Ether.

FCA strategy and competition executive director Christopher Woolard said: “The results suggest that although crypto assets may not be well understood by many consumers, the vast majority don’t buy or use them currently.

“Whilst the research suggests some harm to individual crypto asset users, it does not suggest a large impact on wider society.

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“Nevertheless, cryptoassets are complex, volatile products – consumers investing in them should be prepared to lose all of their money.'

Many cryptocurrencies, including Bitcoin, are not regulated in the UK and fall outside the FCA’s remit, therefore consumers are unlikely to be eligible for compensation.