UK: FCA consults on cryptoasset perimeter exclusions

Why should I read this?

From 25 October 2027, firms carrying on regulated cryptoasset activities by way of business in the UK will need authorisation. On 21 October 2026, the FCA published consultation paper CP26/36 “Cryptoasset Perimeter Guidance”. This is an update to the FCA’s recently-published Policy Statement PS26/18 regarding the cryptoasset regulatory perimeter.

CP26/36 proposes changes to the FCA’s Perimeter Guidance Manual (PERG). The changes reflect the draft Financial Services and Markets Act 2000 (Cryptoassets) (Miscellaneous Amendments) Regulations 2026 (Amendment Regulations). These create new exclusions from the cryptoasset regime. CP26/36 adds new guidance principally on these exclusions, focused on technical service providers, qualifying stablecoins, and proprietary trading. CP26/36 provides draft guidance on how decentralisation interacts with the regulatory perimeter.

CP26/36 matters to stablecoin issuers, payment firms, proprietary traders, market makers, DeFi businesses and technical service providers. The new exclusions are narrow and turn on the facts. The consultation closes on 18 November 2026.

What should I do about the cryptoasset perimeter?

Firms carrying on, or planning to carry on, cryptoasset activities in the UK should take these steps:

• Consider responding to CP26/36

The FCA has given a short deadline for responding, and can only interpret the perimeter established by the Treasury, not change it. However, if you believe there are issues that the FCA has not considered in developing its draft guidance, you should consider responding to the consultation.

• Test your business model against the new exclusions

Look at how your service works in practice, not how it is described. It may be that some of the new guidance is helpful to your analysis as what authorisation, if any, you may need.

• Do not rely on labels

The FCA considers substance rather than terminology. Terms used by crypto businesses such as “DeFi”, “Distributed Autonomous Organisation (DAO)” and “protocol” are not defined by the law, so firms need to consider the substance of what ‘decentralised’ functions they use, as they may fall within the regulatory perimeter. Technical service providers may also fall within the regulatory perimeter.

• Identify every person involved in your arrangements

More than one person (individual or entity) may need authorisation.

• Plan your authorisation application

The application period closes on 28 February 2027. You can request a meeting through the FCA’s pre-application support service (PASS).

• Check the status of any stablecoin you use

Additional exclusions will apply only to UK qualifying stablecoins, not to overseas stablecoins, including in relation to marketing.

The new cryptoasset exclusions

What else do I need to know about the new cryptoasset exclusions?

Decentralisation

While not a specific exclusion per se, the FCA has provided guidance on how decentralisation and the regulatory perimeter interact. The FCA states that the perimeter is technology neutral. Smart contracts and distributed governance do not, by themselves, take an activity outside regulation. Software not controlled by any party is not a person and cannot be authorised. However, the FCA may treat automated functions as carried on by the person who designs or controls them.

The FCA lists three groups of features that may be relevant:

• governance and decision making, including legal control, discretion and liability

• operational and technical structure, including control over design and maintenance

• economic and commercial structure, including financial benefit and control over spending

The FCA has chosen not to define “DAO” or “true DeFi”. It accepts that some arrangements may involve no person carrying on a regulated activity. The “by way of business” test applies to each participant separately. UK based participants in governance, operation or development may create a link with the UK.

This leaves DeFi businesses with a lack of certainty. Each arrangement will need its own analysis of the facts and assessment by experts in regulatory matters. With limited time before an authorisation application may be needed, consideration of the ‘by way of business’ test is imperative.

Safeguarding exclusions

Each of the new safeguarding exclusions cover temporary holdings or holding of stablecoin tied to another function. Each is narrow and has its own conditions, and none removes the need to comply with other FCA rules as part of that other activity.

• Temporary settlement (article 9Q):

Settlement is likely to cover only steps taken after a transaction is entered into. The FCA considers that safeguarding is unlikely to need more than 24 hours.

• Stablecoin backing assets (articles 9QB and 43A):

Issuers of UK qualifying stablecoins need no separate safeguarding permission for backing assets. The CASS 16 safeguarding rules still apply.

• Payment transactions (article 9QA):

This covers UK qualifying stablecoins held briefly to execute a payment. The FCA expects an order for onward transfer to accompany the stablecoin.

• Central securities depositories (article 9R(4)):

This covers relevant specified investment cryptoassets only. The operator must accept responsibility to the underlying customer.

Stablecoins

A UK qualifying stablecoin is one issued by a firm with permission in the UK to issue it, within the scope of that activity. Transfers and exchanges of UK qualifying stablecoins fall outside the dealing and arranging activities, making such transfers more akin to payments transactions. This exclusion does not cover lending or borrowing arrangements.

Title transfer collateral and repurchase arrangements in any qualifying stablecoin are excluded too. The exclusion does not apply if the stablecoin is received from a consumer.

The FCA proposes using six indicators as to whether a product is a qualifying stablecoin rather than electronic money. These include minting before issue, issue using distributed ledger technology and plans for admission to trading. A product cannot be both a qualifying stablecoin or electronic money.

Proprietary trading

Firms dealing as principal only on their own account will not need dealing permission. Authorisation will be required when providing a service to another person. The FCA expects a service to another person to arise in any of these cases:

• the counterparty is a retail investor

• the counterparty pays a fee or commission

• the deal forms part of ongoing arrangements with the counterparty

• the firm holds itself out as a liquidity provider or offers execution services

Market making

Market makers on a qualifying cryptoasset trading platform (QCATP) can rely on a separate exclusion. This includes market makers responding to requests for quotes. The platform operator need not be authorised.

Technical service providers

A new exclusion from arranging covers firms that merely provide a technical service. The service must give access to an authorised firm’s regulated service or to a decentralised protocol. Authorised persons and payment service providers cannot rely on it.

Signs of discretion may remove the exclusion. Examples include routing by price or liquidity, ranking options and promising best execution. The exclusion does not extend to financial promotions or the Money Laundering Regulations.

Wallet and interface providers will need to review their routing and fee models closely. Many may find the exclusion narrower than expected. The provision of certain technical services is already an exclusion under the Payment Services Regulations but the FCA’s proposals in respect of cryptoasset differs in scope. Firms providing fiat payment and cryptoasset services may find that the exclusion does not work in the same way in relation to all of their services. The FCA is clear in its proposed guidance that there is no general exclusion in respect of cryptoassets for services described as ‘technological’ or ‘technical’.

Costs

The FCA has not produced a cost benefit analysis. It expects costs to be limited to reading the guidance. In practice, many tests depend on detailed facts. Firms are likely to face legal costs in applying them.

Next steps

Responses to CP26/36 can be sent by email to cp26-36@fca.org.uk or through the FCA’s online form. The FCA plans to publish final guidance in spring 2027, after the application period closes. Firms will need to apply on the basis of the draft guidance.

Timeline

• 18 November 2026: consultation closes

• 28 February 2027: application period closes

• Spring 2027: FCA publishes final guidance

• 25 October 2027: new regime starts

See our previous client briefings

• UK: FCA consults on cryptoasset perimeter guidance

• UK: FCA finalises the UK Crypto Regime

How Eversheds Sutherland can help

We advise firms providing cryptoasset products or services, including exchanges, brokers, investment managers, custodians and token issuers. We help clients assess whether their activities fall within the UK regulatory perimeter, navigate applicable exclusions and prepare for authorisation, including in relation to safeguarding, stablecoins, proprietary trading, market making, technical services and decentralised business models. 

Our broader cryptoassets practice also supports clients with contentious matters, including cryptoasset fraud, tracing and recovery of digital assets and disputes involving cryptoasset exchanges. Our cybersecurity team works with our award winning cryptoassets team to protect assets and reduce cyber risks.