What you need to know
- Digital Assets' direction of travel, toward institutional adoption and permanent regulatory frameworks, is now irreversible.
- They have moved from the periphery to the centre. We are at the end of the beginning.
- This article analyses some important recent UK developments.
- From wholesale tokenised markets, the UK cryptoassets regime, and the multi-moneyverse, to prudential rules, tokenised gold, AML, and frontier AI; considerable heavy lifting remains.
- We now enter the hard middle; scaled and permanent implementation for live-production.
The End of the Beginning
"[T]he question facing us today is not whether digital technologies will change financial services. They already have." (Economic Secretary to the Treasury, 6 October 2026)
Implementation of distributed ledger technology (DLT) in financial services is now a given. Much heavy lifting remains as we enter the hard middle; the many challenges of the implementation phase.
As we start Q4 2026, this article focuses on select recent UK developments that merit particular attention. Fuller coverage of the global landscape, including EU and US developments, is available at www.ashurstperkinscoie.com/digitalassets. For background on Digital Assets, DLT, and blockchain, see Digital Assets 101.
Wholesale Tokenisation
The Financial Conduct Authority (FCA) has published feedback statement FS26/1, responding to input on the FCA's and Bank of England's Tokenisation Joint Vision. While the UK regulators' late June 2026 publications comprised well in excess of 1,000 pages, the feedback is very brief with only 13 substantive pages.
We described the Joint Vision as a watershed, with the UK finding another gear. In contrast FS26/1 is essentially an entrée, awaiting a detailed FCA and Bank of England Joint Tokenisation Roadmap promised later in 2026. The FCA feedback is unlikely to surprise anyone in the Digital Assets ecosystem, but we agree with the FCA that the paper is helpful.
For example, respondents asked for fast progress, including in relation to prudential treatment and tokenised deposits, with clear timelines and implementation milestones in the Roadmap. They supported progress from sandboxes and pilots to full, scaled, and permanent implementation. Settlement finality regulation should apply to blockchain transactions. Clarity was requested on prudential treatment, and interoperability should be prioritised. Collateral was the most frequently mentioned use-case; with clarity requested for eligible tokenised collateral.
The Roadmap will set out, with specific target dates, how the regulators intend to progress work across priority areas. These include regulating digital securities issuance and settlement, tokenised collateral use, access to central bank money settlement, market functioning, relevant specified investment cryptoasset (RSIC) custody, and supporting the UK Treasury's digitally-native government bond (DIGIT). In addition to the Roadmap, the feedback flags other ongoing FCA work, for example tokenised gold (see below).
Importantly, the feedback recognises that industry and the UK authorities (including Government) will need to work together to achieve tokenised markets. FS26/1 also ties in the work of the Wholesale Digital Markets Champion.
Wholesale Digital Markets Champion
We described July 2026's Wholesale Digital Markets Champion’s First Report as catalytic. Among other things, we noted the importance of UK Government and regulator support and coordination.
The Joint Vision signalled that work with the Wholesale Digital Markets Champion was intended to be joined up. Importantly, the Roadmap will give more detail on this alignment, and the FCA will support cross-sector work including assisting the industry Action Groups.
The Orchestration Group's workstream details have now been published.
Cryptoassets Regime
The UK cryptoassets regime's application window opened on 30 September 2026 (and closes 28 February 2027). These dates will already be prominent in planning schedules. The window is crucial so that firms can, among other things, seamlessly transition to the new regime. (Our most recent updates here and here.)
Notwithstanding the window opening, and June 2026's final rules, the regime is still evolving. PS26/18 sets out FCA guidance for the cryptoassets regime's perimeter, in response to consultation paper CP26/13. TL;DR: the FCA is "broadly proceed[ing] with [the] guidance as consulted on" with "targeted amendments". While the extra guidance is useful, the FCA confirms that changes are not significant.
A key FCA holistic message in the paper is the explanation of the status of FCA guidance. To recap, the regulatory perimeter is set by legislation. Perimeter guidance explains the FCA's understanding of the law; it does not expand, narrow, or alter the perimeter itself. Changes to the perimeter require legislation (the responsibility of the UK Government and Parliament) and definitive interpretation can only be provided by the Courts. (See PERG1.3 in the FCA Handbook for a deeper dive).
The changes include expanded guidance on territorial scope (when activities are "in the UK"), the "by way of business" test, definitions of qualifying cryptoassets versus stablecoins, the control-based approach to safeguarding, and further clarification on activities which are unlikely in themselves to amount to arranging.
However, PS26/18 guidance is not the final word. During the perimeter consultation, the UK Government consulted on amendments to the Cryptoassets Regulations (made in February 2026). The updated amending statutory instrument is now before Parliament. It attempts to rationalise proposed payments services reforms with the new cryptoassets regime. For example, so that stablecoin payments firms do not have to secure cryptoassets authorisation for October 2027 whilst the payments reforms are still being completed. The Government is also taking this opportunity to make updates to the regulations in light of further industry feedback.
Therefore, PS26/18 is perimeter guidance for the February 2026 regulations. The FCA plans to consult on consequential guidance amendments in Q4 2026, with final amended guidance in early 2027. The sequencing is clearly suboptimal (see 'The Hard Middle' below).
Quarterly consultation CP26/32, among other miscellaneous matters, details transitional changes for the cryptoassets regime. There are proposed deferral arrangements for the admission process of qualifying cryptoassets already trading on UK authorised Qualifying Cryptoasset Trading Platforms (6 months deferral), the execution venue requirements for UK dealers and arrangers (3 months deferral), and the execution policy requirement for these firms (3 months deferral). The proposed changes recognise the practical difficulties of implementing these provisions from day one (25 October 2027) of the new regime. The deferrals would remove these unintended 'cliff-edges'. The CP26/32 consultation closes 12 October 2026.
Coinciding with the application window's opening, the FCA published finalised guidance FG26/10 (responding to June 2026's consultation). The guidance helps firms complete the required CRYPTOPRU overall risk assessment. The FCA has implemented most of its original proposals but with clarifications in some areas.
There are other upcoming papers in 2026. For example, the FCA will consult on decentralised finance (DeFi) guidance and separately on operational resilience guidance for firms using DLT. The FCA also has helpful cryptoassets webinar content.
Digital Money
We have previously noted the vital importance of the digital cash leg. The Convergence Imperative Report calls it a day-one requirement, noting that the choice of digital cash leg instrument is "among the most consequential design choices the industry faces".
Global stablecoin initiatives show no sign of letting up. These include a Euro-referencing stablecoin consortium, the Open Standard (OUSD), and a USD-referencing stablecoin consortium. Total stablecoin market capitalisation sits broadly flat for 2026 year-to-date1; perhaps signalling a maturing market. And Tether has launched a private credit fund in an effort to boost stablecoin use. In the UK, the Bank of England has released its sterling-denominated systemic stablecoin policy statement, and the draft Code of Conduct consultation has just closed (our update here).
The major constraint of tokenised deposits has been their limited interoperability. However, there has been substantial recent progress. The Eurosystem's Pontes solution, enabling wholesale tokenised asset transactions to be settled in central bank money, is now live. In a signal of institutional commitment, the ECB will invest part of its own funds in tokenised securities, with settlement via Pontes. There have been live tokenised deposit transactions through Project Agorá, bank-to-bank tokenised deposit interoperability through Swift’s blockchain-based ledger, and live customer transactions using tokenised sterling deposits through the Great British Tokenised Deposit (GBTD) initiative.
The multi-moneyverse continues to evolve.
Prudential Regulation
The Basel Committee on Banking Supervision (BCBS) is conducting a targeted review of its cryptoasset exposures standard (SCO60). SCO60's implementation date was 1 January 2026, but jurisdictions are taking divergent approaches pending the review's outcome. Some have implemented (eg Hong Kong), some partially (eg the EU), some with targeted changes (eg Canada), some have delayed (eg Singapore), others (eg USA) will not implement in the current form. In the UK, the Bank of England's 2022 letter was updated in May 2026, but this continues to be an interim position pending the BCBS review outcome. A consultation on a proposed UK framework is expected in 2028 at the earliest.
Regulatory certainty and aligned common standards remain vital for the global digital assets ecosystem. Prudential rules are a cornerstone of financial systems; this regulatory lacuna needs to be addressed urgently. A BCBS update is promised for 2026.
Tokenised Gold
The FCA has published a Call for Input on tokenised wholesale gold, responding to comments from May 2026's Tokenisation Joint Vision. This is important in its own right; London is the world's biggest market for spot gold trading. The bigger takeaway is the read-across for UK financial services as a whole.
The Call for Input demonstrates the value of advocating to regulators, that the UK regulator is listening to participants, and that the FCA recognises the once-in-a-generation opportunities of digital assets innovation while balancing the risks. Crucially the paper signals the ambition for UK digital markets, and the application of work on gold tokenisation for the wider digital ecosystem.
The closing date for input is 23 October 2026.
AML and Fraud
The UK Government has published the 2026 to 2029 Anti-money laundering and asset recovery strategy, which ties in closely with March 2026's 2026 to 2029 Fraud Strategy. It sets the direction for the UK’s anti-money laundering and asset recovery system over the next three years. The AML Strategy covers all aspects of anti-money laundering and asset recovery, including various initiatives and proposed updates to legislation and regulations (including the Financial Services and Markets Bill, currently in the legislative process).
There is a clear focus on how to tackle the challenges of newer technologies such as AI, cryptoassets, and wider fintech. The UK Government recognises both the benefits and risks of these developments. For example, the Strategy notes stablecoins' role in maintaining the UK’s position as a world-leading financial services hub, and their use for faster cross-border transfers. At the same time the Strategy references Chainalysis research; in 2025 stablecoins are estimated to have accounted for 84% of illicit cryptoasset transaction volume globally.
Frontier AI
AI could obviously be a long article by itself. A BIS Occasional Paper succinctly summarises a current regulatory hotspot: "Frontier AI … does not fundamentally change the foundations of cyber resilience, but it significantly increases the speed and intensity with which established practices need to be executed."
Following the authorities' May 2026 Joint Statement on frontier AI and cyber resilience, on 2 September 2026 the FCA published insights, and the Bank of England wrote on frontier AI harness engineering. On 8 September 2026, the UK Government published an AI Risk Management Toolkit (for the public sector, but can be used more widely). Bank of England Governor Bailey (and current Financial Stability Board Chair) has warned the G20 of frontier AI risks. Governor Bailey has also written on Substack in relation to frontier AI and governance.
There are no new formal rules or guidance; cyber risk remains part of operational resilience. However, the regulatory messaging is very clear: this must be a crucial area of continual focus for firms in an AI-shaped economy.
The Hard Middle
The hard middle, the messy middle, the missing middle, the implementation gap; the same point goes by many names.
The policy direction for Digital Assets is settled, but operational, legal, regulatory, and commercial execution remains. "Technology, law, money, infrastructure, standards and commercial demand must develop as one ecosystem." (Sasha Mills, the Bank of England, 1 October 2026).
The UK Digital Assets ecosystem continues to face three key potential headwinds (or tailwinds).
First, UK Government and regulator support is critical. Regulators are now moving at pace, it is crucial that UK policy and legislation keep up. Signals from the new Government's senior ministers are encouraging, but we are yet to hear Prime Minister Burnham or Chancellor Healey specifically comment on Digital Assets.
Second, there is no shortage of ambition, drive, and dedication. Across Government, regulators, and industry, there is also no shortage of initiatives and proposals. In addition to the substantive heavy lifting, a key challenge remains coordination. It is crucial to ensure that the multiple threads and workstreams are sequenced and all pulling in the same direction. The sequencing of the cryptoassets perimeter guidance illustrates the challenge.
Third, although international cooperation is essential, the world faces a new competitive order with impact across multiple concurrent risk domains.
Authors: Etay Katz, Partner; Bradley Rice, Partner; Sid Ulker, Counsel; Simon Williams, Counsel
- DefiLlama, 24 September 2026.
