UK opens decentralised finance consultation, seeks comments by 18 November
Key Facts
Britain's Financial Conduct Authority opened a consultation on guidance for the use of decentralised finance on 21 October 2026, focusing on the application of operational resilience and financial crime requirements. The guidance targets FCA-regulated firms that provide financial services using decentralised finance and are subject to the relevant regulatory requirements. The proposals include examples of measures those firms could consider to address risks associated with its use in their financial services. The consultation comes in a market where trading on decentralised platforms accounted for around 14% to 19% of global cryptoasset spot trading volume between January and August 2026, according to the FCA document. This work addresses how regulatory obligations apply to firms using decentralised finance, alongside a separate workstream interpreting the boundaries of regulated activities and statutory exclusions.
In its draft guidance on the regulatory perimeter, the FCA said "the regulatory perimeter is technology-neutral", stressing that decentralisation does not in itself change the test for whether an activity requires authorisation. Assessment of an activity under the regulatory framework continues to apply when a firm uses a decentralised protocol to provide its financial services. The presence of participants outside Britain does not in itself rule out an activity being regarded as carried on in the United Kingdom, according to the draft. The same applies to infrastructure located abroad, meaning its location alone is not decisive in determining a connection to the British market. An activity's links to the United Kingdom must be assessed when determining its regulatory status, including where elements of the activity are spread between Britain and overseas.
The perimeter consultation addresses statutory exclusions covering temporary settlement arrangements, alongside an exclusion relating to technical service providers. The latter covers services limited to providing access to services offered by a third party or to a decentralised protocol, according to the FCA. It clarified, however, that the exclusion is not a blanket exemption for every service described as technical, software-based or related to decentralised finance. The FCA said it would allow some flexibility for firms that demonstrate that uncertainty over the technical service provider exclusion prevented them from completing their authorisation applications. That flexibility requires the application to be otherwise complete and submitted within the specified period to qualify for the relevant treatment.
The current consultations build on earlier regulatory steps, with the FCA publishing final rules and guidance on the application of its handbook to cryptoasset firms on 30 June 2026. It then published final guidance defining the scope of cryptoasset activities on 16 September 2026, according to the policy statement for that workstream. The previous consultation on the regulatory perimeter received 78 responses from participants. The FCA said most respondents supported its approach, before the earlier final guidance was issued and additional questions on the perimeter and exclusions were put forward. As these steps progressed, the FCA stressed that cryptoassets remain largely unregulated, apart from financial promotions and financial crime requirements, until the new regime takes effect.
On authorisation, the FCA opened an application window for firms with existing cryptoasset businesses in the United Kingdom on 30 September 2026. The window runs until 28 February 2027, according to the consultation on cryptoasset perimeter guidance. Firms must submit their applications during that window to benefit from the relevant transitional provisions, linking eligibility for those provisions to the timing of submission. The FCA confirmed in its policy statement that firms' existing registrations and permissions would not automatically convert into the permissions required under the new regime. Firms with existing registrations or permissions therefore still need to obtain the permissions required for their activities under the new regime, in line with the authorisation requirements set out by the FCA.
The next step in the decentralised finance consultation is to receive comments from firms and stakeholders by 18 November 2026. The FCA set January 2027 as its target for publishing the final guidance on the use of decentralised finance. That date relates to guidance on applying operational resilience and financial crime requirements to the firms concerned, according to the consultation page. New cryptoasset activities will begin coming within the FCA's regulatory perimeter on 25 October 2027, according to the perimeter policy statement. Authorisation applications are to be submitted before that expansion takes effect, under the FCA's timetable for transitioning existing businesses to the new requirements.