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

The UK's Financial Conduct Authority has unveiled proposed crypto regulations that could significantly expand the definition of custody, potentially affecting platforms and software providers that do not consider themselves custodians. The Cryptoasset Perimeter Guidance, published on Wednesday, outlines several technical pitfalls that firms handling client crypto assets must be aware of. A key aspect of the rules is the 24-hour custody threshold, where 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 reward-compounding tools may lead to the loss of their tech exemption and require full approval for arranging staking. The FCA has emphasized that its new perimeter is designed to strengthen consumer protections, support fair and transparent markets, and address issues such as 'shadow custody.' For stablecoin issuers, the regulations mandate that issuance is only legal if the issuer is established in the UK and manages the entire lifecycle, from initial offering to redemption and reserve maintenance. The FCA is seeking feedback on these proposals until 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 that fail to apply for approval within the five-month window from September 30, 2026, to February 28, 2027, may face fines, suspensions, and permanent closures.