UK FCA Floats Crypto Perimeter Update, Flags 24-Hour Custody Line
The UK Financial Conduct Authority (FCA) has set out proposed guidance that could broaden what counts as crypto "custody", potentially capturing platforms and software providers that do not view themselves as custodians.
In Cryptoasset Perimeter Guidance published Wednesday, the FCA highlighted a key threshold: if a firm, platform or app holds client crypto for more than 24 hours during trade settlement, it is likely to be treated as a regulated custodian. That classification would require a full safeguarding licence.
The regulator also cautioned validators and node operators that their "pure tech" exemption could fall away once they add features that provide "added value." Examples cited include user dashboards, yield features or reward-compounding tools. In such cases, firms would need full authorisation for arranging staking.
The paper also addresses "shadow custody" for the first time. The FCA said a provider should be considered a custodian if it is able, even in theory, to override a client's authority, even if it promises it will never use that power. The FCA added that the use of smart contracts, public blockchains or decentralised elements does not, by itself, put an arrangement outside regulation.
For stablecoin issuers, the FCA said issuance would be permitted only where the issuer is established in the United Kingdom and manages the full lifecycle, including issuance, redemption and reserve maintenance.
The FCA is seeking feedback until the consultation closes on June 3, 2026. It plans to publish finalised rules in policy statements this summer, followed by final perimeter guidance in September.
The roadmap would move crypto service providers from the current anti-money-laundering registration system to a stricter approval regime under the UK's Financial Services and Markets Act (FSMA). Firms that want to continue operating under the new framework would have a five-month window to apply, from Sept. 30 this year through Feb. 28, 2027. Firms that miss the deadline could face fines, suspensions or closure. Only applicants that file within the window would benefit from "savings provisions" allowing them to keep operating while the FCA reviews their application.
