UK Sets Sept ’26 Crypto Licensing Gateway; Firms Warned of ‘No Auto-Convert’ Rule

The UK Financial Conduct Authority (FCA) finally dropped the other shoe on its crypto roadmap today, confirming it will open the licensing gateway for crypto asset service providers (CASPs) in September 2026. The regulator set a hard deadline for the new regime to go live on October 25, 2027, ending years of speculation regarding the transition from simple anti-money laundering (MLR) checks to full-blown financial authorisation.

The Receipt: A Heavy Lift for Incumbents

This is not a rubber-stamp exercise. In an update released Thursday, the FCA made it explicitly clear that current registrations under the Money Laundering Regulations (MLRs) will not automatically convert to the new Financial Services and Markets Act (FSMA) authorisation.

Firms currently operating in the UK, including major exchanges and custodians, must re-apply during a “limited window” starting next autumn. Those who miss this gateway or fail to secure approval by October 2027 will fall into a regulatory limbo, unable to offer new services and forced into a restrictive “run-off” mode for existing contracts.

“Firms that apply outside the application period may not be authorised in time… they would not be able to conduct new UK business until they are authorised,” the FCA noted in its guidance.

Institutional Context: The FSMA Standard

The shift to the FSMA perimeter represents a massive escalation in compliance costs. Unlike the previous MLR regime, which focused narrowly on financial crime vectors, FSMA authorisation requires robust capital controls, governance structures, and consumer duty compliance akin to traditional securities brokerages.

David Geale, the FCA’s Director of Digital Finance, signaled the regulator’s intent to align closely with institutional standards, a move that parallels the U.S. approach rather than the EU’s MiCA framework. For market makers and DeFi interfaces, the “transitional regime” offers a lifeline, but only if they submit applications within the yet-to-be-defined window closing dates.

Market Reaction

The timeline creates immediate pressure on compliance departments. Legal experts at Linklaters highlighted that the application window is arriving “earlier than many stakeholders anticipated,” forcing a scramble for audit trails and capital adequacy proofs well before the 2027 deadline.