UK Crypto Regulations: A 24-Hour Timeframe That May Catch Firms Off Guard

The UK's Financial Conduct Authority has introduced proposed crypto regulations that may broaden the definition of custody, potentially affecting platforms and software providers who do not consider themselves custodians. The FCA's Cryptoasset Perimeter Guidance, published recently, outlines 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 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 necessitate seeking approval for arranging staking. The FCA aims to enhance consumer protection and support fair markets with these new regulations. Notably, the authority has addressed 'shadow custody' for the first time, clarifying that crypto service providers who can theoretically override a client's authority are considered custodians, even if they guarantee not to exert that power. Stablecoin issuers are also subject to strict guidelines, with issuance only permitted if the issuer is established in the UK and manages the entire lifecycle. The FCA is seeking feedback on these proposals until June 3, 2026, and intends to publish finalized rules and perimeter guidance later this year. The new regulations will require all entities providing crypto services to transition 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.