London—The UK’s proposed crypto regime is set to reshape how institutions hold and manage digital assets. As the Financial Conduct Authority opens consultation on new guidance under the Financial Services and Markets Act (Cryptoassets) Regulations 2026, the country is seeking to strengthen its position as a regulated crypto hub. But the same rules may also make institutional self-custody far harder to sustain.
The core issue is no longer custody alone. It is compliance. Safeguarding, reporting, governance, auditability and operational controls are becoming part of the custody stack itself. For many institutions, building this infrastructure internally may prove too slow, costly and complex.
Julian Sawyer, CEO of Zodia Custody, said the UK’s regulatory realignment is likely to change the entire custody technology stack. As the regime takes shape, he said, “the compliance overheads will make self-custody untenable for the majority of institutions.”
The result could be a split in the market. Some institutions will attempt to build bespoke compliance systems in-house. Others will rely on specialised providers that already operate bank-grade custody infrastructure. In a faster-moving market, the latter group may gain an advantage by reducing implementation risk and shortening time to market.
Sawyer said institutions that spend years building their own compliance backend risk losing ground to firms that can connect to a proven platform from the start. The “buy vs. build” decision is therefore becoming less about technology preference and more about regulatory survival.
For the UK, the new regime could offer a competitive advantage if it gives institutions greater clarity. But that advantage will depend on whether firms can adopt standardised infrastructure quickly enough to access tokenisation, on-chain liquidity and emerging digital asset yields.
The likely outcome is not the complete end of self-custody, but a narrower role for it. In a regulated institutional market, custody is becoming less about asset storage and more about compliance, connectivity and operational scale.
