UK Crypto Firms Must Safeguard Assets Under New Rules

The UK's Financial Conduct Authority (FCA) has finalized new rules for crypto firms to follow by October 25, 2027. These regulations will affect how platforms handle customer assets and collateral.

Under the forthcoming framework, firms providing qualifying cryptoasset borrowing services must safeguard relevant crypto collateral, which includes Bitcoin used as collateral. This means that even if a client gives permission for ownership transfer to discharge debt, the coins remain subject to safeguarding requirements until the firm exercises its right to take ownership.

The distinction between lending and borrowing is crucial in this context. While a qualifying lending service can be exempt from acting as trustee for assets during the service, this exemption does not apply to qualifying borrowing collateral.

Covered custody, on the other hand, requires firms to safeguard cryptoassets as trustees under documented arrangements. These trusts are intended to protect clients' rights against competing claims and must satisfy specified legal and safeguarding requirements.