FCA Sets 18 November Deadline on DeFi and Crypto Perimeter Drafts

Britain's Financial Conduct Authority published two crypto papers on Wednesday, and both close on the same day. GC26/7 is draft guidance on how existing operational resilience and financial crime duties reach firms providing services through decentralised finance. CP26/36 is the companion, and it proposes five arrangements that would sit outside the regulated perimeter altogether. Comments on each are due by 18 November. Final text is planned for January 2027, which leaves the regime itself, due to start on 25 October 2027, nearly a year off.

What the DeFi paper does not do

GC26/7 is non-Handbook guidance. The phrasing matters, because non-Handbook guidance creates no new obligations; it describes how the ones already written apply. The FCA names three: SYSC 15A on operational resilience, SYSC 6 on compliance, internal audit and financial crime, and the Money Laundering Regulations. Alongside them it offers what it calls "illustrative examples of measures firms may consider". Crypto Briefing, publishing at 17:38 UTC on Wednesday, put it flatly: the paper does not create a fresh rulebook for DeFi.

The audience is narrower than the subject suggests. The regulator aims the paper mainly at firms already caught by those rules, and treats unauthorised parties, trade bodies and advisers as secondary readers. Its own definition settles nothing about scope, calling DeFi "a general term for financial services facilitated by distributed ledger technology". The operative sentence is shorter.

"Firms using DeFi should do so safely and responsibly, as with other technologies," the FCA said in the paper.

Five ways out of the perimeter

CP26/36 is where a firm might find relief. It proposes exclusions for temporary settlement arrangements; temporary holdings of UK qualifying stablecoins used for payment transactions; arrangements involving the backing assets held for such a stablecoin; proprietary trading where the person provides no service to anyone else, or acts as a market maker on a qualifying cryptoasset trading platform; and technical services that only give access to a third party's services or to a decentralised protocol. PANews lists four of the five, leaving out the backing-asset arrangement. It does not flag that as a correction, and the two versions do not reconcile.

The last exclusion is the one the regulator concedes has caused trouble. The FCA says the timing of the statutory instrument behind these changes left a limited number of firms uncertain about the technical services provider exclusion, and that a firm with an otherwise complete application gets extra time to fix the affected parts. One reading of the perimeter, carried by Crypto Briefing alone, is that the rules bite where an identifiable controlling entity exists, so genuinely decentralised activity may fall outside. That is the outlet's interpretation. The FCA has not said it in those words.

The harder deadline is the gateway

Four weeks to comment is short, and it is not the date most firms are counting toward. The authorisation gateway opened on 30 September, and applications have to be in by 28 February 2027 from any business that wants to keep operating. The FCA expects to decide applications filed in that window before the rules take effect, according to The Crypto Times; no second account read here says so. Both papers sit on top of the final cryptoasset rules published earlier this year. The sequence is unusual. Firms are being asked to apply for permissions whose boundaries are still in consultation.

What nobody has published

No FCA official is named or quoted in any news account read here. The only verbatim material comes from the regulator's own pages. Nobody has published how many applications the gateway has taken since 30 September, or how many firms the technical services problem touched beyond the FCA's "limited number". PS26/18, issued in September, covered the scope of the newly regulated activities; CP26/36 handles the exclusions a second statutory instrument added the day before it. Two papers, one instrument each, and a perimeter that has shifted twice in two months. January is when that stops moving, or does not.