UK FCA Publishes Draft DeFi Guidance, Clarifying When Interfaces Require UK Authorization

On October 21, the UK’s Financial Conduct Authority (FCA) published two documents simultaneously: Consultation Paper CP26/36, “Guidance on the Scope of Regulation for Cryptoassets,” and Guidance Note GN26/7. In CP26/36, the FCA focuses on business models exhibiting certain decentralized characteristics and systematically explains how to determine whether related activities fall within the scope of authorized regulation. The FCA stresses that the use of software, smart contracts, distributed ledger technology, decentralized governance mechanisms, or other technical arrangements is *not* a decisive factor in determining whether an activity is subject to regulation; automation merely reflects *how* a function is delivered and does not alter the legal characterization of whether that function itself constitutes a regulated activity. “True DeFi” is *not* a statutory concept defined under either the Regulated Activities Order or the Cryptoasset Regulations; decentralization exists along a continuous spectrum and neither constitutes a distinct regulatory category nor forms the basis for a separate regulatory framework.