FCA Clarifies Cryptoasset Registration Requirements Ahead Of New 2027 Regime

Key Takeaways

• The FCA has issued updated guidance clarifying who must register under the Money Laundering Regulations (MLRs) to provide cryptoasset services in the UK, ahead of the new regulatory regime launching on 25 October 2027.
• Compliance teams at firms offering cryptoasset exchange, custodian wallet, or marketing services to UK customers should urgently assess registration obligations, given historically low approval rates and high withdrawal/rejection rates.

Deep Dive

This guidance update reinforces the FCA's existing MLR registration framework for cryptoasset businesses while signaling the upcoming transition to a more comprehensive regulatory regime in October 2027. For compliance teams, the key takeaway is that the three-part test—(1) whether the activity is in scope (cryptoasset exchange or custodian wallet services), (2) whether it is carried on "by way of business," and (3) whether it is carried on in the UK—remains the central framework for determining registration obligations. Firms already holding other FCA authorizations (e.g., e-money institutions, payment institutions, FSMA-authorized firms) are explicitly reminded that existing authorization does not exempt them from separate MLR registration if they offer in-scope cryptoasset services.

A notable element is the guidance's treatment of the UK's financial promotions regime, which applies extraterritorially to any firm marketing cryptoassets to UK consumers, regardless of where the firm is based. This creates a potential compliance gap for overseas cryptoasset firms that may not otherwise have a UK nexus but nonetheless target UK consumers through promotions—such firms must either register under the MLRs, obtain promotion approval from an authorized person, or rely on a Financial Promotion Order exemption.

The data disclosed is particularly instructive for risk assessment: since January 2020, only 17% of applications have resulted in registration, while 67% were withdrawn and 12% rejected, indicating a historically rigorous and often unsuccessful registration process. This suggests firms should expect significant scrutiny, invest early in pre-application engagement (noting a 19-request rejection rate for pre-application meetings), and build sufficient lead time into their compliance planning given the complexity and failure rate of applications.

With the new regime commencing 25 October 2027, compliance and legal teams should treat this as a critical interim period: firms should (1) conduct an immediate gap analysis against the three-part scope test, (2) review marketing/promotional activities targeting UK consumers for financial promotion compliance, (3) engage the FCA's pre-application process early given demonstrated bottlenecks, and (4) monitor further FCA publications detailing the 2027 regime's substantive requirements. Failure to register appropriately exposes firms to enforcement risk, reputational damage, and potential criminal liability under the MLRs for carrying on unregistered cryptoasset activity.

Source: Financial Conduct Authority