UK FCA Releases 'Guidance on the Regulatory Perimeter for Cryptoassets'

According to a report by Jinse Finance, on October 22, the UK Financial Conduct Authority (FCA) issued Consultation Paper 26/36 (CP26/36) titled 'Guidance on the Regulatory Perimeter for Cryptoassets,' explaining how to determine whether certain activities require authorization when a business model involves a degree of decentralization. The FCA pointed out that the use of software, smart contracts, distributed ledger technology, distributed governance mechanisms, or other technical arrangements does not, in itself, determine whether regulated activities requiring authorization are present. Automation merely describes the method by which functions are executed and does not determine whether those functions constitute part of regulated activities. The term "true DeFi" is not a statutory concept under the Regulated Activities Order or the Cryptoasset Regulations. Decentralization exists on a continuum and does not constitute an independent or standalone regulatory framework. At the same time, the FCA also released Consultation Paper 26/7 (GC26/7), which explains how regulated firms should manage DeFi risks, with a focus on operational resilience and financial crime risks, and provides examples of measures firms may consider implementing. Both consultation papers are open for feedback until November 18, and the FCA plans to publish final guidance in January 2027. Starting from October 25, 2027, new regulations will bring additional cryptoasset activities under the regulatory scope, and companies wishing to continue related operations must submit authorization applications by February 28, 2027.