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 rules 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 clients' crypto assets. According to the rules, any firm or crypto platform holding client assets for more than 24 hours 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. The regulator has addressed the 'shadow custody' issue, stating that if a crypto service provider has the ability to 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 strict regulations, with issuance only permitted if the issuer is established in the UK and manages the entire lifecycle. The FCA has requested feedback 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 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 fail to apply during the five-month application window, from September 30, 2026, to February 28, 2027, may face fines, suspensions, or permanent closures.