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

The UK's Financial Conduct Authority has proposed new crypto regulations that could significantly expand the definition of custody, potentially impacting platforms and software providers that do not consider themselves custodians. The recently published Cryptoasset Perimeter Guidance outlines several 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 reward-compounding tools may trigger the need for full approval. 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 it will not exert that power. Stablecoin issuers are also subject to new regulations, with issuance only considered legal if the issuer is established in the UK and manages the entire lifecycle. The FCA is seeking feedback on these proposals until June 3, 2026, and intends to publish finalized rules in policy statements this summer. All entities providing crypto services will be required 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 under the new regulations.