FCA turns the DeFi microscope on while crypto carve-outs wait in the wings

The UK Financial Conduct Authority (FCA) opened two consultation periods on Wednesday: one on how companies using decentralized finance can comply with guidance on money laundering and financial crime, and another on “exclusions from cryptoasset regulation” following recent legislative changes.

The DeFi proposal explains how existing rules apply, with the FCA stating that the proposed guidance “seeks to clarify existing rules rather than establish new policy.” Responding to the consultations, the UK Cryptoasset Business Council said, “DeFi sits among the most innovative parts of [Financial Services],” adding: “The UK can still strike the right balance - clear perimeter rules, expectations that stay proportionate, and a framework that lets responsible innovation take root here instead of migrating elsewhere [...] the FCA needs to get this right.”

The cryptoasset exclusions consultation concerns a regulatory regime that includes stablecoin holding arrangements and reserve assets, with the rules expected to be enforced starting in October 2027.

The FCA opened applications for crypto entities on Sept. 30, with a Feb. 28, 2027 deadline for companies seeking to be in compliance with the rules.