UK to DeFi: Prove You're Actually Running Wild, or the FCA Wants a Word

The UK is locking in a 2026–27 crypto regime that keeps "truly decentralised" DeFi outside scope but drags any protocol with an identifiable controlling entity into full FCA authorisation.

Full rules are expected this year and implementation is set for 2027. HM Treasury's draft statutory instrument creates new regulated activities under the Financial Services and Markets Act 2000, giving the FCA broad powers over trading platforms, intermediaries, lending, staking, and decentralised finance.

The law imposes a strict regulatory perimeter requiring a UK-authorised entity for most crypto activities targeting local consumers. Overseas firms serving only institutional clients may remain outside full authorisation, provided they don't intermediate retail users.

DeFi gets a pass—but only if it's genuinely decentralised. Treasury's policy note states that where activities are undertaken on a truly decentralised basis—meaning no person is seen conducting business—authorisation won't be required.

But that exemption is narrow. The FCA plans to hunt for any identifiable controlling entity behind DeFi services and apply its rules there. Large DeFi front-ends, foundation-backed DAOs, and protocol teams setting parameters and capturing fees are likely to be treated as regulated firms once the regime kicks in on 25 October 2027.

The FCA isn't building a bespoke DeFi regime. Instead, its core requirements apply wherever there's an identifiable controlling entity carrying on regulated cryptoasset activities.

London's timeline is now converging