Decentralized Trading Accounts for 14% to 19% of the Cryptocurrency Market
Key Facts
On 21 October 2026, the UK Financial Conduct Authority opened two consultations covering different aspects of cryptoasset and decentralized finance regulation. The first, GC26/7, targets firms already regulated by the FCA that provide financial services using decentralized finance, and proposes guidance on operational resilience, financial crime controls and anti-money laundering requirements. The second, CP26/36, explains the effect of legislative changes on the perimeter of cryptoasset regulation and proposes guidance on exemptions from certain regulated activities. The FCA said the proposed guidance in GC26/7 "does not create new regulatory requirements," but clarifies how existing requirements apply to firms that use or interact with these technologies. The consultations thus distinguish between the obligations of regulated firms using decentralized finance and the activities that may fall outside the scope of authorization.
GC26/7 does not cover all decentralized finance projects. It focuses on FCA-regulated firms providing financial services using decentralized finance if they are subject to operational resilience rules, compliance, internal audit and financial crime requirements, or money laundering regulations. The proposed guidance is intended to help these firms apply existing rules when using decentralized protocols. It focuses on operational resilience and financial crime risks, with illustrative examples of measures firms could consider. The rules cited include operational resilience requirements in SYSC 15A and compliance, internal audit and financial crime requirements in SYSC 6. The FCA says operational resilience requirements will apply to cryptoasset firms from October 2027, whether or not they use decentralized finance.
GC26/7 explains that describing an activity as decentralized or relying on software and smart contracts is not, in itself, enough to take it outside regulation. The FCA says anyone carrying on a regulated activity commercially in the UK, where no exemption applies, needs authorization or an exemption, "even if they describe themselves as operating in decentralized finance." This links the need for authorization to the nature of the activity and the exemptions that apply. In a separate track, CP26/36 explains how firms can determine whether they need FCA permission to carry on regulated cryptoasset activities. Proposed exemptions include technology services limited to providing access to a service offered by a third party or to a decentralized protocol.
Examples of exemptions discussed in CP26/36 include temporary settlement arrangements and certain arrangements for temporarily holding qualifying UK stablecoins for payment transactions. They also include arrangements involving backing assets held for a qualifying UK stablecoin. For dealing on one's own account, the FCA sets out exemptions for cases where a person does not provide a service to another party, or acts as a market maker for a qualifying token, according to the wording in the document. The range of examples reflects the scope of the second consultation, which explains the boundaries of activities exempt from certain regulated activities rather than establishing general operating rules for every protocol. The FCA's statement on GC26/7 had limited the guidance to existing requirements for regulated financial firms using decentralized finance.
The consultations come amid the spread of trading through decentralized platforms and concerns about losses linked to technical vulnerabilities. The FCA estimates that trading on decentralized platforms accounted for about 14% to 19% of global spot cryptocurrency trading volume between January and August 2026. FCA research found that about 8% of UK cryptoasset users acquired them through decentralized platforms in 2025. The FCA also cited industry data showing that losses from decentralized finance and bridge hacks have exceeded $12 billion since 2016. In one example, attackers stole cryptoassets worth more than $290 million in April 2026 by exploiting a vulnerability in a bridge used by Kelp DAO.
The current consultations build on an earlier FCA discussion of decentralized finance. In consultation DP25/1, the FCA received 38 responses to its proposals on the sector. About 65% of participants supported the "same risks, same regulatory outcome" approach, alongside publishing guidance on decentralized finance. In June 2026, the FCA published its final rules and guidance for cryptoasset activities, covering stablecoin issuance, regulated activities and prudential requirements. The two new consultations are a further step toward clarifying how existing requirements apply to firms using decentralized finance and explaining the exemptions made available by legislative changes.
The FCA set 18 November 2026 as the deadline for responses to both consultations and said it plans to publish final guidance for each in January 2027. In parallel, an application window opened on 30 September 2026 for existing firms in the UK cryptoasset market seeking authorization to carry on new regulated activities. The application window closes on 28 February 2027. New cryptoasset activities are due to come within the FCA's regulatory perimeter from 25 October 2027. This timetable sets out deadlines for consultation responses, authorization applications and the start of the new framework.