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

The UK's Financial Conduct Authority has unveiled proposed crypto regulations that could significantly 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 that firms handling client crypto assets must watch out for. A key aspect of the rules is the 24-hour threshold for custody, where any firm or crypto 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 lead to the loss of their pure tech exemption, necessitating full approval for arranging staking. The regulator has emphasized that its new perimeter is designed to enhance consumer protections, support fair and transparent markets, and address the 'shadow custody' issue, where a crypto service provider may be considered a custodian even if it does not exert its authority over a client's assets. For stablecoin issuers, the regulations are clear: issuance is 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 has invited views on these proposals until June 3, 2026, and plans to publish finalized rules 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 that intend to continue operating under the new regulations must apply for approval within a five-month window, from September 30, 2026, to February 28, 2027, or risk facing fines, suspensions, and potential closures.