Redrawing the lines: FCA consults on cryptoasset perimeter guidance and DeFi expectations

On 21 October 2026, the FCA published CP26/36, which consults on further changes to its cryptoasset perimeter guidance in Chapter 18 of the Perimeter Guidance Manual (PERG 18) and GC26/7, which consults on proposed non-Handbook guidance on how operational resilience (SYSC 15A) and financial crime rules (SYSC 6 and the Money Laundering Regulations (MLRs)) obligations apply to authorised firms using, interacting with, or offering access to decentralised finance (DeFi) protocols. Both consultations run on an accelerated four-week timetable closing on 18 November 2026. 

In our previous blog post, we noted that the draft Financial Services and Markets Act 2000 (Cryptoassets) (Miscellaneous Amendments) Regulations 2026 (the Amendment Regulations), which will make targeted amendments to the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (the Cryptoasset Regulations), did not align with the FCA’s policy statement (PS26/18) finalising the cryptoasset perimeter guidance. CP26/36 bridges that gap by bringing the regulatory guidance into line with the new statutory exclusions. 

We’ve summarised some of the key aspects of each paper below that we found particularly interesting. We also spotted that the consultation about the cryptoasset perimeter includes new draft guidance on DeFi (including the concept of ‘True DeFi’, who is a person for the purposes of perimeter analysis, and the impact of DeFi on whether the activity is carried on ‘by way of business’ and ‘in the UK’) – which might not be immediately obvious given the title of the paper.

Cryptoasset Perimeter Guidance (CP26/36)

Technical Services Exclusion 

The FCA have proposed draft perimeter guidance to be included in PERG 18.8.25 to 18.8.35 regarding the application of the new technical services exclusion (Article 9Z2A RAO). As a reminder, this excludes persons who are ‘merely providing a technical service’ from Article 9Y arranging.  The draft guidance contains some detail as to types of arrangements the FCA is likely to consider as falling within this exclusion. For example, a person is more likely to be ‘merely providing’ a technical service when: 

1. the service responds to instructions initiated by the customer;
2. their service is non-discretionary; 
3. the customer selects the service provider and decentralised protocol to be accessed;
4. they do not select, recommend, or rank counterparties or other parts of the transaction; 
5. they do not negotiate material terms of the transaction; and 
6. they do not otherwise participate substantively in deciding whether, when, or how a transaction takes place. 

Conversely, when a person retains discretion, exercises judgment, or otherwise substantively engages in the transaction, that person is more likely to fall outside the exclusion. 

CP26/36 includes draft guidance on the meaning of the term ‘technical service’ and the concept of ‘allowing another person to access’ a regulated activity or decentralised protocol. For the former, the draft guidance notes that it is not the technology involved that makes a service technical but rather the function of the service and its quality (i.e. a service might not involve any technology at all, but still be considered technical). However, the FCA then notes that in practice any service in scope of the exclusion is likely to involve technology, but not all such services will be only technical services. The draft guidance repeats that the service must be ‘merely technical’ and therefore should not involve substantive intermediation. Overall, the draft guidance is not definitive on what is or is not a ‘technical service’ and any determination is likely to be on a case-by-case basis. In relation to the term ‘allowing another person to access’, the FCA understands the term ‘allows’ to mean ‘facilitates’, rather than ‘permits’, since it does not have to mean that without ‘A’ providing the service, ‘B’ would not be able to access it. 

In considering the exclusion more broadly, the draft guidance notes in particular the concepts of ‘discretion,’ ‘substantive participation,’ and ‘substantive intermediation’, despite these terms not being used in the relevant article and only being used in the explanatory memorandum to the Amendment Regulations. The FCA considers that the presence and nature of discretion are therefore relevant to determining whether a person merely provides a technical service and therefore sets out features which indicate whether a person is providing a merely technical service (PERG 18.8.30). In the FCA’s view, the terms ‘substantive participation’ and ‘substantive intermediation’ inform the interpretation of concepts inherent in the exclusion, in particular the concept of ‘merely’. In the FCA’s view, substantive participation or intermediation may arise where A performs a material role in the arrangements through which transactions are facilitated or entered into, rather than remaining a neutral means of access (PERG 18.8.31).  These are supporting concepts only - any determination of whether there is a technical service, and whether a person is ‘merely providing’ such a service, will depend on the context in which these features appear and are used.

Stablecoins

The legislation is intentionally clear that a product cannot be both e-money and a qualifying stablecoin - the determination depends on a case-by-case assessment of the product’s characteristics. The FCA proposes the following features that, in its view, could indicate that a product is a qualifying stablecoin rather than e-money (PERG 18.4.5B): 

1. it is minted before it is issued; 
2. it is issued via distributed ledger technology; 
3. the issuer or another person intends to apply for it to be admitted to trading; 
4. the purpose of backing assets is to maintain confidence in the stability of its value; 
5. the product’s marketing, use, or treatment is that of a qualifying stablecoin; or 
6. it is issued for purposes other than making payment transactions (one of the limbs in the definition of ‘electronic money’ in the Electronic Money Regulations is that e-money must be issued on receipt of funds for the purpose of making payment transactions). 

The FCA notes that this is not intended to be an exhaustive list and that e-money may itself display one or more of the above features. 

The FCA further clarified that the exclusion from the dealing and arranging activities in relation to transfers or certain exchanges of UK qualifying stablecoin means circumstances where the transaction is part of a qualifying cryptoasset lending or borrowing arrangement (PERG 18.8.5A).

Additional Guidance on the Amendment Regulations

CP26/36 also sets out new draft guidance in relation to the exclusion in Article 9UA, which allows firms which are trading in qualifying cryptoassets only on its own account and for its own purposes to do so without being authorised to deal as principal (PERG 18.8.18A).The FCA considers that an example where the exclusion operates would be where a person is trading using its own funds, including borrowed funds,  and that person does not hold itself out as offering any kind of financial service to its counterparty or other person when doing so. The FCA lists the following features that indicate that a service is being provided to a counterparty:

1. the counterparty is a retail investor;
2. charging fees or commission to the counterparty;
3. where a transaction forms part of ongoing arrangements or transactions initiated with and offered to another counterparty; or;
4. where a person holds itself out as a liquidity provider to third parties or as providing other dealing services to other market participants, including execution services.

The appearance of one or more of the above features would indicate that a service is being provided to another party, and therefore the exclusion would not apply. 

Additionally, market making on a qualifying cryptoasset trading platform (QCATP) is also excluded from the activity of dealing as principal. The FCA considers that a market maker is one that holds itself out as able and willing to enter into transactions of sale and purchase in qualifying cryptoassets admitted to a QCATP, at prices determined by it generally and continuously rather than in respect of each particular transaction. A market maker which responds to requests for quotes on a QCATP may rely on this exclusion.

Clarifying the DeFi Perimeter 

Although CP26/36 focusses on the perimeter as it relates to cryptoasset business, it also includes some draft guidance on how DeFi can affect perimeter analysis. The draft perimeter guidance includes a draft response about ‘True DeFi’ – noting that this is not a statutory concept used in FSMA (PERG 18.1.20). In the FCA’s view, calling an arrangement decentralised, automated, or governed by smart contracts does not, by itself, put it outside the regulatory perimeter, although this may be true in some cases. However, the relevant question remains whether one or more persons are carrying on regulated activities through, by means of, or in connection with the arrangements. This will depend on the activity and the facts at hand but relevant considerations may include  who designs the material functions of the arrangements, who deploys, operates, maintains or updates the arrangements, who assumes responsibility or derives a commercial benefit from the functions performed (PERG 18.1.18). In short, the FSMA perimeter tests apply in the way they do for any other regulated activity and each case will turn on its own facts. Any person who develops, runs, governs, maintains, or promotes these arrangements must therefore consider whether their own activities require authorisation. Essentially, the perimeter analysis requires consideration of a number of questions, including whether: (1) there is a person carrying on the activity; (2) a regulated activity is being carried on; (3) the activity is carried on by way of business; (4) the activity is carried on in the UK; and (5) any exclusion or exemption applies.

The new draft guidance also notes that DeFi may impact, in particular, the questions of whether an activity is carried on by way of business and whether an activity is carried on in the UK. PERG 18.2.3 provides that decentralisation does not, by itself, prevent the ‘by way of business’ test from being met, but that where activities are performed by multiple participants, the assessment should be performed separately in relation to each person’s distinct role to decide whether that person carries on regulated activities by way of business. 

The FCA further notes, at PERG 18.3.1A, that decentralisation across multiple jurisdictions can complicate territorial analysis. Yet, similarly to the finding on the ‘by way of business’ test, the FCA does not find that the multi-jurisdictional nature of a decentralised arrangement defeats the ‘in the UK’ test. Rather, persons involved in the arrangements should be considered for their connections to the UK, and the arrangement can be considered connected to the UK on account of those persons and their activities (e.g., governance, operation, maintenance, or development).

As a general rule, the FCA does not consider DeFi to fall outside of the standard rules and therefore proposes guidance in CP26/36 to adapt standard perimeter guidance to this particular case. Our previous blog post describes the perimeter analysis contained in PERG 18 in more detail and remains accurate to the FCA’s general approach.

DeFi Expectations: Operational Resilience and Financial Crime (GC26/7)

GC26/7 sets out proposed non-Handbook guidance to help firms understand how existing operational resilience and financial crime requirements may apply when they provide financial services using DeFi. At a very high level, the general principle is that the FCA expects firms to meet the same regulatory outcomes as are expected in traditional financial services. The non-Handbook guidance offers specific guidance on meeting the FCA’s requirements with specific DeFi examples and case studies. 

Next Steps

The FCA has not moved the application timetable. The application window still closes on 28 February 2027, with the regime commencing on 25 October 2027. In practice, firms may need to apply before the guidance in CP26/36 and GC26/7 is final. With consultation responses due by 18 November 2026 and the transitional gateway closing on 28 February 2027, firms should try to ensure their application packs reflect the updated perimeter.