UK's New Crypto Regulations May 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, highlights 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 lead to the loss of their pure tech exemption, necessitating full approval for arranging staking. The regulator has also addressed the issue of 'shadow custody,' clarifying that if a crypto service provider can theoretically 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 guidelines, with issuance only being considered legal if the issuer is established in the UK and manages the entire lifecycle, from initial offering to redemption and reserve maintenance. The FCA has requested feedback on these proposals, with a consultation period closing on June 3, 2026, and intends to publish finalized rules in the summer, followed by the final perimeter guidance in September. The new regulations 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 have a five-month application window, from September 30, 2026, to February 28, 2027, to apply for the new regulations, with those who miss this deadline facing potential fines, suspensions, and closures.