UK Crypto Regulation Moves Forward: New Cryptoasset Regulated Activities: The FCA Gateway

The close of 2025 highlighted the continuing momentum for the cryptoasset industry, with regulatory developments accelerating rather than slowing. In December, the UK Government and the Financial Conduct Authority (FCA) released a series of draft instruments and consultation papers that are poised to play a significant role in shaping the sector’s future. On 15 December 2025, HM Treasury (HMT) published a revised draft of The Financial Services and Markets Act 2000 (Cryptoassets) Order 2025. This was followed on 16 December 2025 by the FCA’s publication of three consultation papers addressing core elements of the forthcoming cryptoasset regulatory framework: (1) CP25/40 Regulating Cryptoasset Activities, (2) CP25/41 Regulating Cryptoassets: Admissions & Disclosures and Market Abuse Regime for Cryptoassets, and (3) CP25/42 A Prudential Regime for Cryptoasset Firms. Together, these developments underscore that the UK is not retreating from digital asset regulation but instead progressing steadily toward the establishment of a comprehensive and structured framework.   

HMT have now published the statutory instrument ‘the Financial Services and Markets Act (Cryptoassets) Regulations 2026’ (SI. 2026 No 102) (FSMA (Cryptoassets))’. This instrument will amend the Financial Services and Markets Act (FSMA) and bring cryptoassets within the regulatory perimeter. Whilst the regulations will not go into effect until 25 October 2027, the FSMA (Cryptoassets) marks a key legislative shift. It will subject cryptoasset firms to similar standards as traditional financial institutions, meaning that firms will now be required to seek authorisation from the FCA if they engage in the new cryptoasset regulated activities. On 8 January 2026, the FCA provided further detail on its proposed “gateway,” the application process through which firms will seek authorisation to carry on newly regulated cryptoasset activities under the UK’s forthcoming regime. A dedicated application window is planned to open on 30 September 2026, allowing the FCA to assess applications ahead of the new authorisation regime coming into force.

In this piece, we provide a detailed analysis of what this new gateway means for firms, and how they can take advantage of this early application period. Firms that apply during this application window are expected to undergo a smoother transition into the new regulatory sphere and will retain the full set of rights and allowances for conducting cryptoasset activities. Those applying after this period will face more limited permissions, with the scope of authorised activities varying depending on when their application is submitted. While the FCA has not yet outlined the detailed requirements of the application itself, its latest guidance provides a clear picture of what the transition period will involve for cryptoasset firms.

WHO NEEDS TO APPLY 

The new regulated cryptoasset activities are outlined in Part 2 of Chapter 1 of the FSMA (Cryptoassets). These include, amongst others, issuing qualifying stablecoin, operating a qualifying cryptoassets trading platform and qualifying cryptoasset staking. These cryptoasset activities will be regulated in the same manner as the existing regulated activities under the FSMA framework, and all firms that intend to conduct these activities will need to apply to the FCA to be regulated.  

It is important to note that firms that are already authorised by the FCA to undertake other regulated activities, must still apply to the FCA to vary their existing permissions if they will be conducting any of the regulated cryptoasset activities.

APPLICATION PERIOD

Part 7 of the FSMA (Cryptoassets) provides a ‘Savings and Transitional Provision’ that aims to manage and co-ordinate the transition into the new regulatory framework. This gives the FCA the ability to create an ‘application period’ window in advance of the new regime. The application period is expected to open on 30 September 2026 and to close on 28 February 2027. During this period, cryptoasset firms are encouraged to apply and seek authorisation so that once the legislation comes into effect, they are authorised to undertake regulated cryptoasset activities.

SAVING AND TRANSITIONAL PROVISIONS

Two sets of provisions are established in Part 7 of the FSMA (Cryptoassets); the saving provision and the transitional provision. Each provision allows for different actions, rights and activities to be conducted. Firms must have met a set of conditions in order to operate in each provision, as further discussed below.

Under the saving provision, firms can continue to provide cryptoasset services. The saving provision can be used by firms waiting for a decision to be made on their application as long as they submitted their application during the application period. Once the legislation has come into effect, firms must notify the FCA as soon as reasonably practicable if they are relying on the saving provision and must also notify the FCA when they stop relying on it.

The transition provision narrows the scope of activities that can be conducted by firms. Specifically, Regulation 56 (Temporary exemption relating to pre-existing contracts) of the FSMA (Cryptoassets) grants a temporary exemption to allow firms to continue any cryptoasset activities that relate to pre-existing contracts. The activities must be necessary to fulfil obligations under the contracts and can be undertaken only to the extent necessary. Other than this, the cryptoasset firm will be unable to continue cryptoasset operations or enter into any new contract which requires undertaking a regulated cryptoasset activity.

Additionally, firms must notify the FCA that they are relying on the exemption and must also inform counterparties that they are not authorised to undertake the relevant activity. Under Regulation 59, the FCA retains the ability to cancel the exemption, impose conditions and revoke it entirely. It also may publish information concerning firms relying on the exemption if the FCA deems that they have acted in a manner contrary to the advancements of the FCA’s objectives. Those objectives, set out in Part 1 of the FSMA (Cryptoassets), are intended to enable the FCA to make or approve designated activity rules, provide guidance and directions, and carry out the preparatory work required to perform its functions under the regulations.

APPLYING DURING THE APPLICATION PERIOD

Firms that apply during the application period should expect to have their applications decided before the new regime starts and the legislation comes into effect. If the FCA reject a firm’s application, the firm will be able to appeal by referring the decision to the Upper Tribunal (Tax and Chancery Chamber). If the Tribunal agrees with the FCA’s refusal, the firm will move into the transitional provision and will need to wind down and exit the UK market.

If at the time of the new regime coming into effect, a firm has not heard a decision from the FCA on their application or has not heard from the Upper Tribunal on an appeal, they may operate within the saving provision.  

APPLYING AFTER THE APPLICATION PERIOD

Firms can still apply after the application period has closed; the application process will be the same and the rights of appeal will remain. The key difference from applying within the application period is that, while the application is still pending, the firm will not benefit from the saving provision. This means that if the legislation comes into effect and the application is still pending before the FCA, it will automatically fall into the transitional provision when the new regime begins. As discussed above, this significantly limits the firm’s activities, including those related to cryptoassets. Therefore, it is advisable to apply within the application period and ensure that the firm is authorised in advance so as to not disrupt general business activities.

FAILURE TO APPLY

Firms that conduct regulated cryptoasset activities and do not apply for authorisation before the new regime commences must run-off their UK cryptoasset business before the commencement date in October 2027. Failure to do so will be considered to be conducting unauthorised business and a breach of the FSMA in the same way it would be for the previous set of regulated activities (S19 for new firms, S20 for firms already authorised by FCA for other activities).

FCA SUPPORT

The FCA is offering support sessions for all relevant cryptoasset firms, agents and professionals that are interested in attending. The sessions will provide more information about the new regime and how the authorisation process will work. Firms can also request a free of charge pre-application meeting with a member of the FCA. These meeting are aimed at ensuring firms are submitting high quality applications that will facilitate a faster assessment and decision.

FOR MORE INFORMATION 

If you have any questions regarding this subject or related subjects, or if you need assistance, please contact Yulia Makarova (Partner), Rebecca Jack (Partner), or your Winston & Strawn relationship attorney. You can also visit our Cryptocurrencies, Digital Assets & Blockchain Technology page for more information.