The UK’s Financial Conduct Authority (FCA) is proposing crypto rules that could quietly expand the definition of custodian, potentially sweeping in platforms and software providers that don’t consider themselves custodians.
The FCA published its Cryptoasset Perimeter Guidance on Wednesday, which includes a few technical pitfalls for firms handling clients’ cryptoassets.
The rules draw a red line at the 24-hour mark for pretrial detention. Any company or crypto platform or app that holds client assets for more than a day during trade settlement is likely to fall under the regulated custodian classification, triggering a requirement for a full protection license.
Validators and node operators must also proceed with caution. The regulator warned that those involved in these activities will lose their pure technology exemption the moment they provide “value-added” functions. That includes things like user dashboards, returns, or reward compounding tools. In those cases, they must seek full approval to organize strike action.
“Our new perimeter gives us the tools to strengthen consumer protection and support fair, transparent and orderly markets as the sector matures,” the FCA said in the paper.
It is also noteworthy that the FC has addressed the issue of “shadow detention” for the first time. The financial watchdog made it clear that if a crypto service provider allows it to theoretically override a client’s authority, it is officially a custodian, even if it guarantees it will never exercise that power.
“The fact that an arrangement involves smart contracts, public blockchains or some elements of decentralization does not determine the perimeter position or place the arrangement outside of regulation,” the document noted.
For stablecoin issuers, the mandate is equally blunt, as it only considers issuance legal if the issuer is established in the UK and controls the entire lifecycle. It includes everything from the initial offer to redemption and reserve maintenance.
The FCA requested views on these proposals until the consultation ends on June 3, 2026, it said in a separate statement on Wednesday. The regulator intends to publish final rules in policy statements this summer, followed by final perimeter guidance in September.
The roadmap forces all entities providing crypto services to move from the current anti-money laundering registration systems to a stricter approval regime under the UK’s Financial Services and Markets Act (FSMA).
Companies intending to continue operating under the new rules face a five-month application period from September 30 this year to February 28, 2027. Missing this deadline exposes them to potential fines and suspensions, as well as permanent closures.
Only those who apply during the application period will benefit from the so-called “saving provisions”, which allow them to continue operating while the regulator considers.
