Regulation 53 and 56: what happens if you file late, or not at all
Two provisions, two very different outcomes
SI 2026/102, made on 4 February 2026, brings the new UK cryptoasset regime into force on 25 October 2027. Part 7 of that instrument contains two transitional routes for firms that are already operating on that date. They are frequently discussed as though they were one mechanism. They are not, and the distinction between them is the difference between a business and a wind-down.
The first is the saving provision at regulation 53. It applies to a firm that applied within the FCA's application window and whose application has not been determined by the commencement date. The second is the temporary exemption at regulation 56. It applies to a firm that did not apply in time, withdrew its application, or was refused and has exhausted review.
Regulation 53: an undetermined application lets you keep trading
Where a firm applied inside the window and the FCA has not reached a decision by 25 October 2027, Parts 3 to 6 of the SI do not apply to that firm for a transitional period of up to two years, that is up to 25 October 2029. In plain terms, the firm carries on. It continues to serve customers, continues to take on new business, and continues to operate while the FCA works through its file.
The protection also extends to a firm whose application has been refused but where the refusal remains open to review. It ends when the application is finally determined, or when the two years expire, whichever comes first.
This is the outcome every existing firm should be aiming at, and the condition attached to it is simple: apply inside the window. The window opens 30 September 2026 and closes 28 February 2027. There is no version of regulation 53 that rescues a firm that missed it.
Regulation 56: run-off, not trading
The temporary exemption is a different animal. The FCA describes it as an exemption from sections 19 and 20 of FSMA, the general prohibition, and only to the extent necessary for the performance of a pre-existing contract entered into before the firm entered the provision.
What that permits and forbids is worth setting out plainly:
- The firm may perform its obligations under contracts already in place when it entered the provision.
- The firm may not enter into new contracts with new UK customers.
- The firm may not enter into new contracts with its existing UK customers either. This is the point most often missed.
- Financial promotions are limited to those necessary for the performance of a pre-existing contract.
The provision runs for a maximum of two years from commencement. The FCA has said that firms continuing regulated activities after that point face enforcement action.
Notification and disclosure obligations
Run-off is not a quiet status. A firm must notify the FCA when it enters the provision and again when it ceases to rely on it. It must also tell the counterparties to its pre-existing contracts that it is operating under the transitional provision, and inform them of any material changes to asset protection, dispute resolution or access to compensation arrangements. The FCA also has power to direct a firm into run-off and to cancel a firm's use of it.
Those disclosures are, in practice, a notice to your customer base that you are closing. Plan for the commercial consequences of sending them, not just the compliance mechanics.
The open question
What counts as performing an obligation under a pre-existing contract is not obvious where the customer relationship is a rolling series of transactions under framework terms rather than a single closed trade. Commentators have flagged this as unresolved. If your book is structured that way, do not assume the answer; take a view in writing, document the reasoning, and be ready to defend it. Treat it as an open item until there is guidance on it.
What this means for the filing decision
The two provisions collapse into one operational instruction. A complete application inside the window buys up to two years of ordinary trading under regulation 53. A late or abandoned one buys, at best, a supervised two-year exit under regulation 56 with no new business of any kind. The gap between them is not a matter of degree.
The checklist behind this article
Our UK gateway readiness checklist is an 11-page document built around exactly this question: what has to be in the file before 28 February 2027, with each item cited to a rule, an article number or a published FCA statement, and open questions, like the scope of a pre-existing contract, marked as open. USD 149, with a free updated edition when the September 2026 fee notice and the autumn perimeter guidance land.
If you know which permissions you need and simply need to get the file finished in time, the checklist covers it. If you are already at the edge of the window, or weighing whether run-off is the honest answer for part of your book, a 48-hour gap check will get you to a decision faster.