The research, which was conducted online among 2,203 people aged over 18, found that while the number of people investing in cryptocurrencies would not yet see them classed as mainstream, 27 per cent of consumers who were aware of them were or would consider investing in them.
But despite this, only 11 per cent said they had a good understanding of how they work - though this increased to 23 per cent among under 35s.
Of those aware, 9 per cent currently invest in cryptocurrencies while another 9 per cent have previously invested but no longer do so. A further 27 per cent said they were open to investing.
Meanwhile, the research revealed 64 per cent of those aware of cryptocurrencies said investing in them was gambling, while 75 per cent believed their promotion should be regulated.
Just under a third (30 per cent) of those aware of cryptocurrencies believed these products were driving innovation in the financial services industry and this rose to 64 per cent amongst those currently investing.
When it comes to reasons to invest, there was a strong element of being influenced by hype, not wanting to miss out or be left behind.
While consumers recognised some of the risks of investing and admitted they could end up regretting it, 23 per cent of investors and potential investors would consider getting into debt to buy cryptocurrencies.
Jonathan Pallant, head of stakeholder and public affairs at the FSCS, said "While investing in cryptocurrency does not come with FSCS protection, the terms ‘cryptocurrencies' and ‘FSCS protection of crypto investments' are right at the top of the most searched for items on our website.
“The UK government is developing its ambition to make the UK a global ‘crypto hub', with HM Treasury launching an open consultation in February 2023 on the ‘Future financial services regulatory regime for cryptoassets'.
“Therefore, it is important that there are sector wide conversations on this subject.”
The interviews were conducted as online self-completion between March 2 and 20, with a total of 2,001 of them reported to have heard of cryptocurrencies prior to the research.
It found 74 per cent of those aware of cryptocurrencies had heard of bitcoin. Awareness of other cryptocurrencies and digital assets was much lower.
The research also revealed 80 per cent of those with experience or open to investing cited reasons that could be grouped as being ‘swayed by the hype’ as a motivation to invest.
More than half (59 per cent) of those with experience investing spent less than £250 on their first purchase, and 45 per cent spent less than £250 in total across all purchases.
Around 54 per cent of those with experience or open to investing agreed they could end up regretting investing in cryptocurrencies, while 51 per cent agreed it was easy to invest and 52 per cent agreed they saw crypto ads everywhere
Elsewhere, the research also found financial advisers were the most trusted source when it comes to providing accurate information about investing in cryptocurrencies.
Pallant said: “At the FSCS we are contributing to the discussion with our insights, in order to try to support the best policy outcomes for all our stakeholders.
“Equally, having more data enables us to respond with timely information to inform the work of FSCS, our regulatory colleagues and the government."