UK FCA Opens DeFi Consultations Ahead of 2027 Framework

The UK's Financial Conduct Authority has opened two consultations to clarify how decentralized finance businesses will be regulated and which crypto activities could qualify for exemptions when the country's new framework takes effect in October 2027. According to CryptoNews, the proposed guidance outlines how existing operational resilience, financial crime, and money laundering rules apply to firms utilizing decentralized protocols.

The first consultation, GC26/7, centers on financial services firms that use decentralized protocols or grant customers access to them. The FCA emphasized that regulated businesses remain accountable for meeting existing compliance obligations under systems relying heavily on smart contracts and automated transactions. The regulator noted that DeFi's open structure can expose firms and customers to operational failures and financial crime risks, particularly without traditional intermediaries.

The second consultation, CP26/36, addresses the boundaries of the upcoming cryptoasset regime following proposed draft regulations. Certain stablecoin payment arrangements, temporary settlement activities, proprietary trading, and technical service providers could qualify for regulatory exemptions. Existing UK crypto businesses have until February 28, 2027, to apply for authorization ahead of the new framework taking effect on October 25, 2027.

Both consultations opened on October 21 and will accept industry feedback until November 18, with final guidance expected in January 2027. Industry groups have urged the regulator to maintain proportionate compliance requirements to prevent firms from relocating outside the UK.

Key facts

• The UK FCA opened two consultations covering DeFi compliance and exemptions on October 21, accepting feedback until November 18.
• The new regulatory framework is scheduled to take effect on October 25, 2027.
• Existing UK crypto businesses must submit authorization applications by February 28, 2027.
• Potential exemptions include certain stablecoin payment arrangements, proprietary trading, and technical service providers.