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 regulations 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, outlines several technical traps for firms handling client crypto assets. According to the rules, any firm 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 emphasized the importance of strengthening consumer protections and supporting fair, transparent markets as the sector evolves. Notably, the FCA has addressed the issue of 'shadow custody,' making it clear that if a crypto service provider can theoretically override a client's authority, it is considered a custodian, regardless of whether 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 has requested feedback on these proposals, with a consultation period ending on June 3, 2026. The regulator plans 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 intend to continue operating under the new regulations have a five-month application window, from September 30, 2026, to February 28, 2027. Failure to meet this deadline may result in fines, suspensions, or permanent closures. Only firms that apply during the application period will be eligible for 'savings provisions' that allow them to continue operating while the regulator reviews their applications.