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The UK’s Financial Conduct Authority (FCA) has opened two consultations to clarify how decentralized finance (DeFi) businesses will be regulated and which crypto activities may qualify for exemptions under the country’s new regulatory framework, scheduled to take effect in October 2027.
The consultations cover compliance requirements for businesses using decentralized protocols and the types of crypto services that may not require FCA authorization. Both opened on October 21 and will accept feedback until November 18. The FCA expects to publish its final guidance in January 2027.
FCA explains rules for DeFi businesses
The first consultation focuses on how existing financial regulations apply to firms using decentralized protocols or providing customers with access to them.
The FCA said businesses must still meet their compliance obligations when using smart contracts and automated systems. The proposed guidance covers operational resilience, financial crime controls, and anti-money laundering requirements.
According to the regulator, DeFi services can expose businesses and customers to operational failures and financial crime risks, especially when services operate without traditional intermediaries.
The guidance explains how firms can manage these risks under existing rules. It does not create a separate set of regulations specifically for decentralized finance.
Which crypto activities could be exempt?
The second consultation examines which activities may fall outside the UK’s upcoming crypto regulatory framework.
Potential exemptions include certain stablecoin payment arrangements, temporary settlement activities, and some services involving assets backing qualifying stablecoins.
Businesses trading cryptoassets for their own accounts, rather than providing services to customers, may also qualify for exemptions in certain circumstances. Some market-making activities on regulated crypto trading platforms could be excluded as well.
Technical service providers may qualify when their role is limited to helping customers access another business’s services or a decentralized protocol.
However, using blockchain technology, smart contracts, or decentralized governance does not automatically exempt a business from regulation. The FCA will consider the actual services being provided and whether they fall within the activities covered by the law.
Crypto firms face an authorization deadline
The FCA’s crypto authorization application window opened on September 30, 2026, and is scheduled to close on February 28, 2027.
Eligible businesses that apply within the window may continue providing permitted crypto services while their applications are being reviewed, even if a decision has not been made when the new framework takes effect.
However, submitting an application does not guarantee approval. Existing registration under the UK’s Money Laundering Regulations will not automatically transfer into the new authorization system.
Businesses that miss the deadline could face more restrictive transitional arrangements, generally limiting them to servicing existing contracts while awaiting authorization.
The FCA has also acknowledged that uncertainty surrounding certain technical service exemptions may have affected some firms’ preparations. In specific cases, additional flexibility may be available if businesses can show that this uncertainty materially affected their ability to prepare an application.
Industry seeks clear and proportionate rules
The UK Cryptoasset Business Council has urged the FCA to provide clear regulatory boundaries and proportionate compliance requirements for decentralized services.
The industry group warned that overly restrictive rules could encourage crypto businesses to move their operations outside the UK.
The consultations give businesses an opportunity to comment on the proposed requirements before the FCA finalizes its guidance. The outcome will help clarify how the UK intends to regulate DeFi-related services while distinguishing activities that require authorization from those that may qualify for exemptions.