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

The UK's Financial Conduct Authority has unveiled proposed crypto regulations that may broaden the definition of custody, potentially affecting platforms and software providers that do not consider themselves custodians. The Cryptoasset Perimeter Guidance, published on Wednesday, highlights several technical pitfalls for firms handling client 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 necessitate seeking approval for arranging staking. The FCA aims to strengthen consumer protections and support fair, transparent markets with these new regulations. Notably, the authority has addressed the 'shadow custody' issue, clarifying that crypto service providers allowing theoretical override of client authority are considered custodians, even if they guarantee not to exert that power. The regulator has requested 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 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. Firms must apply for approval within a five-month window, from September 30, 2026, to February 28, 2027, to avoid potential fines, suspensions, and closures.