UK Advances Comprehensive Regulatory Framework for Crypto Assets

Under the FCA’s outline, core crypto activities, including trading, custody, issuance and staking, would fall within the regulatory perimeter, marking a shift from the UK’s current patchwork approach focused primarily on financial promotions and anti-money laundering compliance.  The regulator expects firms to begin applying for authorization as early as September 2026, with the full regime slated to come into force by October 2027.

The consultation is intended to help firms determine whether their business models fall within scope as policymakers transition toward a more comprehensive system governing crypto-asset services.  This clarity is particularly significant for global firms serving UK customers, including U.S. operators that will need to reassess their structures and compliance obligations ahead of the authorization window.

A central feature of the FCA’s proposal is its reliance on an “activity-based perimeter,” rather than licensing entire firms. As Yuriy Brisov, partner at Digital & Analogue Partners told Decrypt, “It is drafted around intermediated models: issuers, custodians, venues, staking providers, rather than around protocol-level functions,” adding that the approach is “more flexible than an entity-based licence but still aligns with today’s CeFi taxonomy.”

That design choice reflects an effort to balance regulatory clarity with flexibility in a fast-evolving market. However, it also leaves open significant questions, particularly around decentralized finance. Brisov noted that the current framework “deliberately does not yet describe the part of the market most likely to define the next cycle,” warning that firms developing non-custodial or composable systems should expect “ongoing classification debates.”  He added that “it is also unclear—and [European Union] regulation faces a similar problem—how DeFi protocols should operate in the early stages,” arguing that “the only truly DeFi project on Earth so far is Bitcoin.”

Read more: SEC and CFTC Release First-Ever Crypto Classification Framework 

The FCA’s approach also draws heavily on traditional financial regulatory tools. According to Brisov, the framework “largely repurposes the post-2008 toolkit—authorisation, prudential capital, conduct rules, market-abuse surveillance,” though it “does not yet address the risks that emerge from the technology itself.”  The regime prioritizes risks such as custody integrity, financial crime and market abuse, while leaving more complex issues—including cross-protocol contagion and offshore spillovers—less clearly addressed.

Further rulemaking is expected. The FCA has indicated it will launch additional consultations later this year covering decentralized finance guidance and operational resilience requirements for firms using distributed ledger technology, alongside updates to its Financial Crime Guide.  Earlier consultations have already addressed consumer protection, conduct standards and oversight obligations for crypto firms operating in the UK.

The current consultation period runs until June 3, with final rules anticipated this summer and supplementary guidance to follow in the autumn.  The initiative builds on legislative changes adopted in February that formally brought crypto activities within the UK’s regulatory remit, part of a broader strategy to create what regulators describe as an “open, sustainable and competitive” market.

The UK’s forward movement stands in contrast to the United States, where efforts to enact comprehensive crypto market structure legislation have repeatedly faltered amid political divisions and jurisdictional disputes among federal agencies. While U.S. regulators have continued to act through enforcement and incremental guidance, the absence of a unified statutory framework has left firms navigating a fragmented regulatory landscape.

By comparison, the FCA’s consultation represents a clearer pathway toward full-spectrum crypto oversight—albeit one that still leaves key questions unresolved, particularly around decentralized technologies and systemic risk.