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UK lets firms seek Bitcoin yield rules that may drop trust safeguards

The FCA says its 2027 regime is expected to start Oct. 25, 2027, under which lending for yield may qualify for a trust exemption while certain retail borrowing collateral must stay safeguarded.

Reported · Written up by our desk · Regulation

UK crypto firms can now apply for authorization under the UK’s expected 2027 crypto rulebook, with the FCA drawing a distinction between Bitcoin pledged as qualifying borrowing collateral and Bitcoin transferred for lending for yield. CryptoSlate reports that this difference could affect how customers position themselves for recovery if a platform fails, because safeguarded assets and a contractual promise to return equivalent coins offer different starting points than transactions where those protections may not apply.

Under the FCA’s future rules, covered custody generally requires a safeguarding trust under CASS 17, the crypto custody chapter of the Client Assets Sourcebook. Retail collateral that supports an in-scope crypto borrowing service must remain safeguarded, with a narrow debt-discharge exception.

CryptoSlate adds that a qualifying lending service could instead use a lending trust exemption, depending on how the assets are handled under the rule set. While the FCA has opened applications and firms can use the Connect system to seek authorization or vary permissions, the safeguards finalized June 30 are not yet in effect, with the new regime expected to begin Oct. 25, 2027.

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