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 technical traps for firms handling client crypto assets, including a 24-hour threshold for custody. Any firm 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 trigger the need for full approval for arranging staking. The FCA has addressed the 'shadow custody' issue, stating that if a crypto service provider can theoretically override a client's authority, it is considered a custodian, even if it guarantees not to exert that power. Stablecoin issuers are also subject to strict regulations, with issuance only permitted if the issuer is established in the UK and manages the entire lifecycle. The FCA has requested feedback on these proposals, with a consultation period ending on June 3, 2026, and plans to publish finalized rules in the summer, followed by final perimeter guidance in September. The new regulations will require all entities providing crypto services to transition from the current money-laundering registration system to a stricter approval regime under the UK's Financial Services and Markets Act. Firms that fail to apply for approval during the designated five-month window, from September 30, 2026, to February 28, 2027, risk facing fines, suspensions, and permanent closures.