The UK Financial Conduct Authority on Oct. 21 published two consultation papers tied to its upcoming crypto regime: CP26/36, titled Guidance on the Regulatory Perimeter for Cryptoassets, and GC26/7, which sets out how regulated firms should approach DeFi-related risks. The regulator said the use of software, smart contracts, distributed ledger technology, distributed governance mechanisms, or other technical arrangements does not by itself determine whether an activity falls within the scope of authorization. It also said automation describes how a function is carried out, not whether that function forms part of a regulated activity.
In the same package, the FCA said so-called “true DeFi” is not a statutory concept under the Regulated Activities Order or the Cryptoasset Order, and that decentralization exists on a spectrum rather than under a separate regulatory framework. The consultation on both papers closes on Nov. 18. The FCA plans to publish final guidance in January 2027. From Oct. 25, 2027, new cryptoasset activities will be brought into scope, and firms that want to continue those activities must submit authorization applications by Feb. 28, 2027.
On Oct. 21, the UK Financial Conduct Authority (FCA) published Consultation Paper 26/36, Guidance on the Regulatory Perimeter for Cryptoassets, setting out how to assess whether authorization is required when a business model involves some degree of decentralization.
The FCA said the use of software, smart contracts, distributed ledger technology, distributed governance mechanisms, or other technical arrangements does not in itself determine whether a regulated activity requiring authorization exists. It added that automation describes the way a function is performed and does not decide whether that function forms part of a regulated activity.
“True DeFi” is not a separate legal category
The FCA said so-called “true DeFi” is not a statutory concept under the Regulated Activities Order or the Cryptoasset Order. In its view, decentralization sits on a spectrum and does not create an independent or standalone regulatory framework.
Separate paper covers DeFi risk management
At the same time, the regulator released Guidance Consultation 26/7 (GC26/7), explaining how regulated firms should manage DeFi risks. The paper focuses on operational resilience and financial crime risks, and includes examples of measures firms may consider.
Consultation deadline and implementation timeline
Both consultation papers are open for comment until Nov. 18. The FCA said it plans to publish final guidance in January 2027.
Starting Oct. 25, 2027, the new rules will bring new cryptoasset activities within the regulatory perimeter. Companies that want to continue carrying out those activities must submit authorization applications by Feb. 28, 2027.
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