FCA DeFi Guidance Draft Sets Six Tests For Interface Exclusion

FCA DeFi guidance has a pointed message for front ends. An interface placed between users and a protocol does not earn a UK exemption by itself. That line sits in the FCA's October consultation paper CP26/36, next to a six-part test for what counts as a mere technical service. Comments are due on 18 November 2026.

The response page of the FCA consultation paper CP26/36. Source: FCA CP26/36.

Why FCA DeFi guidance exists

From 25 October 2027, the Cryptoassets Regulations 2026 bring new regulated activities into the UK perimeter. A second statutory instrument adds exclusions. They cover proprietary trading, temporary settlement arrangements and technical services that only give access to a third party's service or to a decentralised protocol. CP26/36 proposes guidance on how those exclusions work.

Decentralisation gets its own chapter. Using software, smart contracts, distributed ledgers or distributed governance does not settle whether someone is carrying on a regulated activity, the paper says. Facts decide. Substance counts for more than the label on an arrangement.

Two further proposals follow. Where functions are spread across several participants, the "by way of business" test applies to each person separately. And overseas elements do not, alone, take an activity outside the UK.

Six tests in the draft technical-services text

Paragraph 18.8.26 of the draft lists what makes a provider "more likely to be merely providing a technical service." Start with the user. A service that only answers instructions the user starts is closer to the mark. The user picks the service or protocol, never the provider. Whatever the user sends is passed along with no qualitative judgement on content or destination.

Then comes the provider's own conduct. It must not select, recommend or rank counterparties, protocols, liquidity sources or execution routes. Negotiating or setting material terms is out. So is any substantive part in deciding whether, where or how a trade takes place.

The six factors in the draft guidance, PERG 18.8.26. Source: FCA CP26/36, appendix 1.

Services that help select, shape, direct, negotiate or route transactions sit on the other side of the line. Automation changes nothing here. The draft says the result may stand "even though instructions are submitted through an automated interface and some or all of A's functions are performed automatically."

Where the FCA DeFi guidance draws its limit

Interfaces can qualify. The FCA DeFi guidance names software, an interface, infrastructure, connectivity and an access mechanism as things a technical service may include. A fee does not disqualify one, and neither does a design aimed at crypto transactions. Delivery through software proves nothing in either direction.

Then comes the warning that opens this piece. The draft puts it this way: "a person does not obtain the benefit of the exclusion simply by placing an interface between users and arrangements described as decentralised." Authorised persons and payment service providers cannot rely on the exclusion at all. It also stops short of dealing, and it leaves financial promotions rules and the Money Laundering Regulations untouched.

Final FCA DeFi guidance is due in spring 2027. Question 14 asks for views on the technical-services text in sections 18.8.25 to 18.8.35. Responses can go to cp26-36@fca.org.uk.