UK's New Crypto Regulations: A 24-Hour Deadline That Could Catch Firms Off Guard

The UK's Financial Conduct Authority has introduced proposed crypto regulations that could broaden the definition of custody, potentially affecting platforms and software providers that do not consider themselves custodians. The FCA's Cryptoasset Perimeter Guidance, published on Wednesday, outlines several technical pitfalls for firms handling clients' crypto assets. According to the rules, any firm or crypto platform holding client assets for more than 24 hours during trade settlement will likely be classified as a regulated custodian, requiring a full safeguarding license. Validators and node operators must also exercise caution, as providing 'added value' features such as user dashboards or yield tools will require full approval for arranging staking. The FCA has stated that its new perimeter will strengthen consumer protections and support fair, transparent, and orderly markets as the sector matures. Notably, the regulator has addressed the 'shadow custody' issue, making it clear that if a crypto service provider can theoretically override a client's authority, it will be considered a custodian, even if it guarantees it will never exert that power. The FCA has requested feedback on the proposals until June 3, 2026, and intends to publish finalized rules in policy statements this summer, followed by the final perimeter guidance in September. The new regulations will require all entities providing crypto services to transition from the current money-laundering registration systems to a stricter approval regime under the UK's Financial Services and Markets Act. Firms that fail to apply during the five-month application window, from September 30, 2026, to February 28, 2027, risk facing fines, suspensions, and permanent closures.