UK FCA proposes updates to crypto perimeter guidance

The Financial Conduct Authority is consulting on updates to its cryptoasset perimeter guidance to reflect recent legislative changes. The guidance will be important for firms determining whether they need UK authorisation under the incoming cryptoasset regime, including for proprietary traders, market makers, technical service providers and stablecoin issuers assessing newly introduced exclusions. Firms have until 18 November 2026 to provide their feedback.

The FCA’s proposals in CP26/36 update the cryptoasset parts of its perimeter guidance (PERG) which it published in September 2026 via PS26/18. This latest consultation seeks to address changes made by the draft FSMA 2000 (Cryptoassets) (Miscellaneous Amendments) Regulations 2026, referred to below as the Cryptoassets Amendment Regulations.

Prop trading and market making

The Cryptoassets Amendment Regulations introduce a new exclusion from the regulated activity of dealing in qualifying cryptoassets as principal for proprietary traders and market makers. The exclusion is available for activities carried on otherwise than for the purpose of providing a service to another person and for market making on a qualifying cryptoasset trading platform (QCATP).

In its draft guidance, the FCA addresses when a proprietary trader can rely on the exclusion by dealing as principal other than for the purpose of providing a service to a third party. In the FCA’s view, the activity will generally involve providing a service to the counterparty (making the exclusion unavailable) in each of the following cases:

• where the counterparty is a retail investor;

• where the transaction involves a fee or commission being charged to the counterparty;

• where the transaction forms part of ongoing arrangements or transactions initiated with and offered to another counterparty; or

• where a person holds itself out as a liquidity provider to third parties or as providing other dealing services, including execution services, to other market participants.

The FCA also considers when a person acts as a market maker on a QCATP. In the FCA’s view, this involves determining prices “generally and continuously” rather than in respect of each particular transaction.

Technical service providers

The Cryptoassets Amendment Regulations introduce an exclusion from arranging deals in qualifying cryptoassets for service providers meeting certain conditions (for example, the exclusion is only available if the provider is neither an authorised person nor a payment service provider) and merely providing a technical service allowing another person to access services provided by a third person or a decentralised protocol. The proposed guidance explains the FCA’s view on the meaning of “merely providing” and “a technical service”.

In the FCA’s view, the exclusion distinguishes technical access from substantive intermediation in cryptoasset transactions. It is not intended to be a general carve-out for services described as technological, technical, automated, software-based or connected with decentralised finance (DeFi).

Safeguarding exclusions

The Cryptoassets Amendment Regulations introduce new exclusions from the activity of safeguarding cryptoassets, including for arrangements relating to backing assets held to maintain the stable value of a UK qualifying stablecoin. The FCA emphasises that this exclusion applies only to backing assets for UK qualifying stablecoins, rather than other qualifying stablecoins.

A further exclusion covers UK qualifying stablecoins held temporarily for the execution of a payment transaction. In the FCA’s view, the stablecoin should be accompanied by an order for onward transfer and “temporarily” means that it is not held for longer than necessary to execute that transfer.

The draft guidance also addresses the new safeguarding exclusion for central securities depositories. The FCA notes, among other things, that the CSD exclusion only relates to safeguarding of relevant specified investment cryptoassets and not qualifying cryptoassets.

Distinguishing stablecoins from e-money

The FCA makes other changes separate from the Cryptoassets Amendment Regulations. For example, in response to industry feedback, it has sought to clarify the distinction between qualifying stablecoins and electronic money.

Under the UK regime, a product cannot be both a qualifying stablecoin and e-money. According to the FCA, the presence of one or more of the following non-exhaustive characteristics could indicate (but not, on their own, determine) that a product is a stablecoin rather than e-money: 

• It is minted before it is issued;

• It is issued using distributed ledger technology (or similar technology);

• The issuer or another person intends to apply for it to be admitted to trading;

• The purpose of holding backing assets is, at least in part, to assure others that the product will maintain its stable value;

• The product is marketed as a qualifying stablecoin, the issuer holds itself out as issuing a qualifying stablecoin, or the product is, in practice, treated as a qualifying stablecoin by intermediaries such as wallet providers; or

• It is issued for purposes other than making payment transactions.

Decentralisation

Under UK regulation, only “persons” need to be authorised (or exempt). In some cryptoasset arrangements, activities may be undertaken by software, smart contracts or other technological arrangements. In some of these decentralised arrangements, functions traditionally performed by a single firm are instead distributed across multiple participants.

To determine whether any person is performing regulated activities in these situations, the FCA says it may consider who designed or determined the material functions of the arrangements; who selected or can change material parameters or criteria; who deploys, operates, maintains or updates them; and who assumes responsibility for or derives a commercial benefit from them.

The FCA clarifies that whether a function is automated does not determine whether a regulated activity is being carried on. Likewise, distribution of decision-making, governance or operations between multiple persons does not necessarily prevent those persons from needing to be authorised or rely on an exemption.

Next steps

Comments on the consultation are due by 18 November 2026. The FCA plans to publish final guidance in spring 2027.

Firms will need to consider how the perimeter guidance impacts their preparations for the introduction of the UK crypto regulatory regime. In particular, existing crypto principal trading firms will now need to carefully weigh up whether or not to start work on applications based on the FCA’s draft guidance on the scope of the proprietary trading exemption, considering the fixed timeline with the FCA’s gateway for cryptoasset applications already being open and the application period for firms to benefit from transitional arrangements closing on 28 February 2027.

The FCA is separately consulting on guidance to help firms providing financial services using DeFi understand their obligations to maintain operational resilience and tackle financial crime (GC26/7). Read our blogpost: UK FCA consults on guidance for decentralised finance.