Pay Plan Update

Cryptocurrency harms and its effects on mental health and wellbeing

Last year we wrote about the rise of cryptocurrency and the potential dangers it can pose in terms of debt and mental health. As one of the UK’s leading providers of free debt advice and a referral partner for a number of national wellbeing charities, including GamCare, it’s a subject that’s close to our heart.

We’ve put together a summary of what cryptocurrency is, how it can lead to financial harm, how it can affect your mental health – and what to do if you, or a loved one, have been affected.

What is cryptocurrency?

The Bank of England defines cryptocurrency by breaking down the word into two parts: ‘crypto’ means hidden or secret reflecting the secure technology used to record who owns what – and for making payments between users; ‘currency’ meaning a type of electronic cash. Cryptocurrencies exist electronically and use a peer-to-peer system, but there’s no central bank or government to manage the system or step in if something goes wrong.

The value of crypto fluctuates according to many factors, and they are mostly seen as an investment in tech stock. Just as with other stocks across different markets, people investing in cryptocurrencies can lose money as well as making a profit.

Understanding the harms of cryptocurrency

Cryptocurrency investing can sometimes show similar tendencies to gambling. Often, such behaviours provide an escape from issues a person might be going through at any given time. In some cases, use won’t lead to addiction, but the notion that cryptocurrency, like gambling, can act as a road to riches, can make this a very slippery slope, especially if you’re already struggling with debt and looking for a way out of it.

Lack of regulation 

Crypto businesses providing services with digital tokens – and any cryptocurrency exchange providing its service to UK users – must be approved and register with the Financial Conduct Authority (FCA) for anti-money laundering purposes.

Security tokens, as an example, fall within the Financial Conduct Authority’s regulatory remit and they include tokens that provide rights such as (among others) ownership position, repayment of a specific sum of money and/or entitlement to a share in future profits.

At the time of writing, though, there is no regulation of cryptocurrencies within the UK which means that there isn’t any consumer protection if things go wrong. This means you’re unlikely to have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS) if you need support.

The FCA advises checking the Financial Services Register to find out whether a firm is authorised to carry out any of these activities – and it’s currently consulting on new rules on how cryptocurrencies are promoted.

Knowing the signs to look out for

So, what are some of the signs to look out for if you suspect a loved one is struggling with cryptocurrency – or perhaps you feel you might be suffering yourself?

If you notice these signs support could be needed:

• Prioritising cryptocurrency over your loved ones – or work and other activities that you need to get done
• Accumulating debt
• Lying about how you might be using your time
• Dealing with unpredictable mood swings
• Tiredness and sleep disturbance
• Constantly checking prices/value
• Feeling stressed, anxious and irritable
• Continuing to dabble in cryptocurrencies regardless of any negative impacts it’s having on your overall wellbeing, other relationships and work life

These are just a few symptoms, but you may well experience others.

What are the risks?

Like other investments, there can be a significant financial risk. Recently, there has been a period of drastic fluctuation in value – with almost $1 trillion worth of value being wiped away in the past month. On a single day, the price of one of the top 10 most valuable cryptos, Terra (LUNA), fell by more than 98%. Market volatility like this can cause distress for investors, who may have lost large sums without understanding the risk they were taking.  

As previously mentioned, those suffering with a cryptocurrency dependency can find themselves going down a road that’s rife with debt, as they begin to struggle to pay bills on time – or at all – take out loans from friends, family or even loan sharks, defaulting on payments – and in more extreme cases, losing assets, such as their home or their car, when all other options have been exhausted.

How we can help if you’re struggling with debt

The first big step to take is recognising that you might have a problem. The next biggest step is reaching out to us for help.

Whatever debts you may have accumulated, if you’re wanting to make a fresh start, and prepared to stop dabbling in cryptocurrency or other forms of gambling, one of our advisers can run through your situation with you and provide you with a suitable recommendation to get you on the path to becoming debt-free.

As the discussion around cryptocurrencies continues within the wider world, charities are beginning to research ways in which this problem has developed and how they can help people who find themselves struggling.

If you are concerned about your cryptocurrency trading being harmful, GamCare recommends you use Gamban blocking software to restrict access to trading platforms on your devices. You can receive a free Gamban license via their TalkBanStop initiative. Find out more here https://www.gamcare.org.uk/talk/  

If you’re struggling with debt and want to receive further support, contact PayPlan by calling freephone 0800 280 2816 or visit our website www.payplan.com/bfawu