UK's New Crypto Regulations May Catch Firms Off Guard

The UK's Financial Conduct Authority has introduced new 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 recently, outlines several technical traps for firms handling clients' crypto assets. A key aspect of the rules is the 24-hour threshold for custody, where any firm or platform holding client assets for more than a day during trade settlement may 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 may lead to the loss of their tech exemption, necessitating full approval for arranging staking. The FCA aims to strengthen consumer protections and support fair markets with these new regulations. Notably, the guidelines address 'shadow custody' and stablecoin issuance, emphasizing that allowing override of client authority or issuing stablecoins without being established in the UK and managing the entire lifecycle may be considered non-compliant. The FCA is seeking feedback on these proposals until June 3, 2026, and plans to publish finalized rules and perimeter guidance later this year. The new regulations will require all crypto service providers to transition from the current money-laundering registration system to a stricter approval regime under the Financial Services and Markets Act, with a five-month application window from September 30, 2026, to February 28, 2027.