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

The UK's Financial Conduct Authority has introduced new crypto regulations that may broaden the definition of custody, potentially affecting platforms and software providers that do not consider themselves custodians. The recently published Cryptoasset Perimeter Guidance 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 necessitate seeking full approval for arranging staking. The regulator has addressed the 'shadow custody' issue, clarifying that allowing theoretical override of a client's authority constitutes custodianship, even if the power is never exercised. Stablecoin issuers are subject to strict guidelines, 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 intends to publish finalized rules in the 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 system to a stricter approval regime under the UK's Financial Services and Markets Act. Firms have a five-month application window, from September 30, 2026, to February 28, 2027, to apply for approval, with those missing the deadline facing potential fines, suspensions, and permanent closures.