UK FCA Proposes Regulating Crypto Apps That Automatically Select Trading Paths; DeFi Aggregators May Need to Apply for Licenses

On October 24, citing CryptoSlate, the UK Financial Conduct Authority (FCA) stated in a newly released draft of its regulatory guidance that if cryptocurrency trading applications automatically select trading venues and execution routes via algorithms based on factors such as price, liquidity, transaction costs, or execution speed, they may be classified as engaging in regulated crypto asset arranging activities and would require appropriate licensing.

The regulation may impact DeFi trade aggregators and automated trading interfaces. The FCA noted that software services that merely relay user trading instructions without intervening in execution decisions may qualify for a technical services exemption; however, algorithmic automatic execution of trading decisions does not exempt operators from regulatory obligations. Regulators will also assess whether decentralized platforms are involved in regulated activities based on actual control rights, operational responsibilities, and economic interests.

The UK's new regulatory framework for crypto assets is scheduled to take effect on October 25, 2027. Existing firms must submit license applications within a designated window prior to February 28, 2027, while the FCA plans to release final guidance following the consultation period.