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

The UK's Financial Conduct Authority has proposed new crypto rules that may 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. 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 stated that its new perimeter will enhance consumer protections and support fair, transparent, and orderly markets as the sector matures. Notably, the FCA has addressed the 'shadow custody' issue, clarifying that if a crypto service provider can theoretically override a client's authority, it is considered a custodian, even if it guarantees it will never exert that power. For stablecoin issuers, the rules are clear: issuance is only legal if the issuer is established in the UK and manages the entire lifecycle, from initial offering to redemption and reserve maintenance. The FCA is seeking views on these proposals until June 3, 2026, and intends to publish finalized rules in policy statements 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 systems to a stricter approval regime under the UK's Financial Services and Markets Act. Firms that fail to apply during the designated five-month window, from September 30, 2026, to February 28, 2027, risk facing fines, suspensions, and permanent closures.