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 may broaden the definition of custody, potentially affecting platforms and software providers that do not consider themselves custodians. The FCA's Cryptoasset Perimeter Guidance, published recently, includes several technical traps 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 reward-compounding tools may lead to loss of their pure tech exemption, necessitating full approval for arranging staking. The regulator has introduced measures to strengthen consumer protection, support fair markets, and address the 'shadow custody' issue, making it clear that crypto service providers allowing theoretical override of client authority are considered custodians. For stablecoin issuers, the rules 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 has requested feedback on these proposals, with a consultation period ending on June 3, 2026, and intends to publish finalized rules later this summer. 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, with a five-month application window from September 30, 2026, to February 28, 2027.