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 Cryptoasset Perimeter Guidance, published on Wednesday, outlines several technical traps for firms handling client crypto assets. According to the rules, any firm holding client assets for more than 24 hours during trade settlement will likely 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 issue of 'shadow custody' for the first time, 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 new regulations, with issuance only being considered legal if the issuer is established in the UK and manages the entire lifecycle. The FCA is seeking views 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 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, and only those who apply during this period will be allowed to continue operating while the regulator deliberates.