Cryptoupdated 49m ago2 min read
UK FCA Seeks Feedback on DeFi AML Guidance and Crypto-Asset Rule Scope
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FCA opened consultations on DeFi compliance and crypto asset exemptions ahead of the 2027 regime. Draft guidance says smart contracts and distributed governance do not by themselves determine authorization requirements.
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FCA drafts DeFi guidance
The UK Financial Conduct Authority is seeking feedback on draft guidance meant to clarify DeFi operators’ anti-money laundering obligations and the scope of crypto-asset regulation.
The FCA said the effort is intended to clarify existing rules rather than introduce new policy, as it moves to define how the rules apply to decentralized finance.
The UK Cryptoasset Business Council said DeFi is one of the most innovative areas within financial services and argued that clear regulatory boundaries and balanced expectations are needed to build a framework for responsible innovation.
The FCA also tied its consultations to a wider timetable, with a crypto-asset regulatory framework set to take effect in October 2027 and a Feb. 28, 2027 application deadline for crypto-asset businesses.
Smart contracts do not exempt
The FCA published draft guidance saying the use of software, smart contracts or distributed governance does not determine whether someone is carrying on a regulated crypto activity that requires authorization from 2027.
The FCA said the analysis “always turns on the facts,” and it treated the substance of an arrangement as what counts rather than the terminology used to describe it.
The FCA also set out that the new UK crypto regime takes effect on Oct. 25, 2027, and that anyone carrying on a regulated crypto activity by way of business in the UK will need FCA authorization unless exempt.
The FCA’s consultation also included feedback due by Nov. 18, 2026, as it addressed new exclusions for technical service providers, stablecoin backing assets, proprietary trading and market making.
Exemptions, deadlines, and impact
The FCA launched two consultation periods on how businesses using decentralized finance should comply with its guidance and on exemptions for certain cryptoassets due to “recent legislative changes.”
The FCA described its DeFi guidance as aiming to clarify existing rules rather than introduce new policy, while it framed the exemption consultation as tied to recent UK legislative developments.
The FCA said the proposed guidance and exemption regime connect to stablecoin custody and reserve assets, with a regulatory regime scheduled to come into effect on October 1, 2027 and a deadline of February 28, 2027 for firms seeking compliance.
The FCA’s consultations also set a feedback deadline of Nov. 18, 2026, and the broader UK crypto regulatory perimeter was described as scheduled to apply from October 25, 2027.