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 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, highlights several technical traps for firms handling clients' crypto assets. A key aspect of the rules is the 24-hour threshold for custody, where 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. Additionally, validators and node operators must exercise caution, as providing 'added value' features such as user dashboards or yield tools may lead to the loss of their pure tech exemption, necessitating full approval for arranging staking. The FCA aims to strengthen consumer protections and support fair markets with these new regulations. The guidance also addresses 'shadow custody' and stablecoin issuance, emphasizing that issuers must be established in the UK and manage the entire lifecycle. The FCA is seeking feedback on these proposals until June 3, 2026, and plans to publish finalized rules later this summer, followed by the final perimeter guidance in September. The new regulations will 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 have a five-month application window, from September 30, 2026, to February 28, 2027, to apply for the new regime, and those who miss this deadline risk facing fines, suspensions, or permanent closure.