The Financial Conduct Authority (FCA) has published Consultation Paper CP26/13, setting out draft guidance on how firms should determine whether their cryptoasset activities fall within the UK regulatory perimeter.
The consultation forms part of the FCA’s wider programme of cryptoasset regulation and is intended to provide firms with greater clarity ahead of the introduction of the UK’s new authorisation regime.
For many firms operating in the cryptoasset sector, the consultation seeks to answer a fundamental question: will their activities require FCA authorisation under the future regulatory framework?
Our experts break down what firms need to know to answer that question.
Background to the Consultation Paper
The UK Government has committed to bringing a broad range of cryptoasset activities within the financial services regulatory framework. As part of this process, the FCA has been publishing a series of consultations covering various aspects of the future regime, including stablecoins, custody, prudential requirements, and conduct standards.
CP26/13 focuses specifically on perimeter guidance. Rather than introducing new rules, it explains how the FCA expects firms to assess whether their activities fall within the scope of regulation.
The consultation follows the publication of legislation establishing the framework for regulating cryptoasset activities and is intended to support firms as they prepare for the forthcoming authorisation process.
Key Proposals
The draft guidance provides the FCA’s interpretation of several cryptoasset activities that will become regulated under the new framework.
These include the issuance of qualifying stablecoins, safeguarding and custody services, the operation of qualifying cryptoasset trading platforms, dealing in qualifying cryptoassets as principal or agent, arranging transactions in cryptoassets, and certain staking-related activities.
The FCA has also included a range of examples intended to help firms understand how the perimeter may apply in practice. These examples are designed to assist businesses in assessing their own operating models and identifying where regulatory obligations may arise.
A key feature of the FCA’s approach is that regulation is determined by the activity being executed rather than the type of cryptoasset involved. This reflects the broader UK regulatory model, which focuses on the risks created by activities rather than the underlying technology.
How Firms Should Assess the Perimeter
A significant proportion of the consultation is dedicated to helping firms determine whether their activities fall within scope.
The FCA emphasises that firms should consider the nature of the activity being performed, whether it is executed by way of business and whether any exclusions or exemptions may apply. Firms will need to undertake a careful assessment of their business models rather than relying solely on how their products or services are described.
The consultation also highlights the importance of UK nexus considerations. In particular, firms will need to assess whether services are being provided in the UK or whether activities are being directed at UK customers. This will be especially relevant for overseas firms that currently offer cryptoasset services on a cross-border basis.
As the UK moves towards a comprehensive regulatory framework for cryptoassets, understanding these perimeter considerations will be essential in determining whether FCA authorisation is required.
Next Steps for Firms
Although the guidance remains subject to consultation, firms may wish to begin reviewing their activities now.
The FCA is expected to use feedback from the consultation to finalise its perimeter guidance as part of the wider implementation of the UK’s cryptoasset regime. Firms that are likely to fall within scope should continue monitoring regulatory developments and prepare for the future authorisation process.
If you have questions about how the FCA’s proposed cryptoasset perimeter guidance may affect your business, please contact an API Compliance consultant using the form below.
