Just like "the It's man" who introduced Monty Python's Flying Circus, the UK regulation of cryptoassets has been a long time arriving but is very suddenly upon us. For existing activities to be 'grandfathered' into the regime you must apply to the Financial Conduct Authority between 30 September 2026 and 28 February 2027. Working backward, it usually takes at least 3 months to prepare an application, so you'll need to be in a position to start that process in June. Yet the FCA has only just begun consulting on its "Perimeter Guidance" on where the boundary of the new regulatory regime lies. Comments are invited by 3 June 2026 with a view to the FCA finalising its interpretation "in September"... Below's a brief summary of the consultation for information purposes. If you need advice, please get in touch via Keystone. Of course, this follows a similar though transitional issue throughout the EU/EEA under the Markets in Cryptoassets Regulation (MiCAR) for which the application window closes on 1 July 2026. For advice on that, please get in touch via Crowley Millar.
A key challenge for everyone in the crypto space is that 'bare' cryptoassets themselves have been largely unregulated since being popularised by the launch of bitcoin in 2009 (often referred to as 'exchange tokens' or 'utility tokens').
But some cryptoassets might have characteristics that also make them some kind of 'traditional' regulated instrument (usually referred to as 'security tokens' and 'e-money tokens').
So any firm which is already active in the crypto sector has to be careful in approaching the FCA for authorisation to carry on a new regulated cryptoasset activity in relation to a newly defined "qualifying cryptoasset" or "qualifying stablecoin" (or in the case of
safeguarding, a “relevant specified investment
cryptoasset”) that it has not already been carrying on an existing regulated activity for which it should already have obtained FCA authorisation.
The FCA even sounds a clear warning about this, as well as getting the analysis right in relation to newly regulated activities:
2.8 Persons should consider the perimeter in relation to every activity they perform and should carry out an analysis on a case-by-case basis. Whether an activity is regulated will depend on the specifics of what a person is doing and their role in the relevant arrangements, whether the activity is carried on in the UK, whether it is carried on by way of business, and whether any exclusion or exemption applies.
2.9 Anyone carrying on activities in relation to cryptoassets must consider the legislation and guidance carefully, and ensure that they have the appropriate permission for any regulated activities they carry on, or an exclusion or exemption...
2.10 In cryptoasset markets, some terminology is used differently and business models do not necessarily map onto traditional financial services concepts. It might not be clear whether an arrangement is inside or outside the perimeter just from its name – what is important is the substance of the activity and the role performed by the person in question, not the terminology the market participants adopt.
2.11 Persons should also consider this proposed guidance carefully where a service includes automated, blockchain-based or decentralised features. The fact that an arrangement involves smart contracts, public blockchains or some elements of decentralisation does not determine the perimeter position or place the arrangement outside of regulation. The question remains whether there is an identifiable person whose business includes carrying on the relevant activity in the UK. In that context, depending on the activity, considerations should include whether a person operates or maintains the service, sets key parameters, controls important aspects of how it functions, and/or receives fees or some other commercial benefit from the activity. As with any perimeter question, the analysis will depend on the facts.
2.12 Carrying on a regulated activity in breach of the general prohibition has significant consequences. Contravention of section 19 of FSMA is a criminal offence that carries a term of imprisonment of up to 2 years, an unlimited fine, or both. A breach of the general prohibition means that agreements entered into by the unauthorised person carrying on regulated activity are unenforceable. There are also consequences for anyone who’s already authorised but who does not have the correct permission for the regulated activities they intend to carry on.
The consultation paper then goes on to explain the FCA's proposed interpretation of what constitutes the regulated instruments as well as the new types of regulated activity, including when they would be considered to be conducted 'by way of business' and 'in the UK' and how the exclusions might apply, as well as how all this relates to the existing registration regime for some types of cryptoasset service provider under the money laundering regulations and the financial promotions regime.
If you need advice on such things for the UK, please get in touch via Keystone.
Of course, this follows a similar though transitional issue throughout the EU/EEA under the Markets in Cryptoassets Regulation (MiCAR) for which the application window closes on 1 July 2026. For advice on that, please get in touch via Crowley Millar.
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