UK's New Crypto Regulations: A 24-Hour Deadline That Could 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 clients' crypto assets must watch out for. A key aspect of the rules is the 24-hour threshold for custody, where any firm or platform holding client assets for more than a day during trade settlement will likely be classified as a regulated custodian, requiring a full safeguarding license. Validators and node operators must also exercise caution, as they will lose their exemption if they provide 'added value' features such as user dashboards or yield tools, and must seek approval for arranging staking. The FCA aims to strengthen consumer protections and support fair markets with these new rules. Notably, the regulator has addressed the 'shadow custody' issue, making it clear that if a crypto service provider can override a client's authority, it is considered a custodian, even if it guarantees not to exert that power. The rules also mandate that stablecoin issuers must be established in the UK and manage the entire lifecycle, from initial offering to redemption and reserve maintenance. The FCA is seeking feedback on these proposals until June 3, 2026, and intends to publish finalized rules later this 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 have a five-month application window from September 30, 2026, to February 28, 2027, to apply for approval, and only those who apply during this period will be allowed to continue operating while the regulator deliberates.