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

The UK's Financial Conduct Authority has introduced proposed crypto regulations that could significantly expand the definition of custody, potentially affecting platforms and software providers that do not consider themselves custodians. The recently published Cryptoasset Perimeter Guidance outlines technical traps for firms handling clients' 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 yield tools may trigger the need for full approval for arranging staking. The FCA 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. Stablecoin issuers are subject to strict requirements, with issuance only permitted 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, with finalized rules to be published 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 intending to continue operating under the new regulations have a five-month application window, from September 30, 2026, to February 28, 2027, with those applying during this period eligible for 'savings provisions' allowing them to continue operating while the regulator reviews their application.