Market Briefing
Author: Eric Williamson
Purpose of this briefing
This briefing brings together two developments published within weeks of each other: the FCA’s final cryptoasset regime rules (PS26/11 and PS26/12, June 2026) and the Wholesale Digital Markets Champion’s first report to the Chancellor (July 2026).
Read together, these documents set out both the compliance perimeter firms must now build towards and the wider market infrastructure, in particular the Digital Gilt Instrument (DIGIT) pilot and the Digital Securities Sandbox (DSS), against which that perimeter will operate in practice. Firms preparing authorisation applications should treat the two as a single planning exercise rather than parallel workstreams.
Where the two initiatives intersect
The Champion’s report is not a regulatory instrument, but several of its findings bear directly on the practical experience of firms authorising under PS26/11 and PS26/12. We set out the four most material intersections below.
1. The DIGIT pilot sits inside the authorisation transition window
The Champion’s report recommends that Government prioritise an immediate pilot issuance of DIGIT no later than Q1 2027, which is after the FCA’s authorisation gateway opens (30 September 2026) but before regime commencement (October 2027). Firms intending to participate in DIGIT-related activity, or to use DIGIT as eligible collateral, should expect to be operating in a period where their own authorisation status and the sovereign digital instrument’s secondary market are both still maturing simultaneously. This transitional overlap is worth building into implementation timelines rather than treating authorisation and market participation as sequential steps.
2. The DSS Gate 2 pathway is separate from Part 4A authorisation
16 firms are currently in the Digital Securities Sandbox, but the report notes that all remain at the testing stage (“Gate 1”); progression to “Gate 2” (live business under initial limits) still depends on a clearer regulatory glidepath from the Authorities. This is a materially different gateway from the FCA’s standard Part 4A authorisation route opening on 30 September 2026. A firm could be simultaneously pursuing Part 4A authorisation under PS26/11/12 for its general cryptoasset activity and separately seeking DSS Gate 2 progression for specific tokenised securities activity. We recommend that firms map which of their intended activities fall under each gateway before submitting applications to avoid duplicate or misdirected regulatory engagement.
3. Legal and regulatory gaps have direct authorisation consequences
The Champion’s report sets out a table of policy areas still requiring greater legal and regulatory certainty. Several of these are not peripheral; they bear directly on what an authorised firm can safely do once through the gateway.
| Policy area | Status according to the Champion’s report | Relevance to PS26/11 and PS26/12 authorisation |
|---|---|---|
| Settlement finality under the Financial Markets and Insolvency Regulations | Not yet fully adapted for DLT-based settlement outside the DSS | Affects insolvency protection for tokenised collateral and repo transactions operated alongside authorised cryptoasset activities |
| PRA prudential treatment of tokenised assets | Permanent framework deferred until at least 2028, pending the Basel Committee review; interim expectations only | Creates a prudential treatment gap for firms authorised under the regime between October 2027 and the introduction of a permanent framework |
| Custody of digital assets | Policy has not yet been finalised by HM Treasury and the FCA | Directly relevant to firms seeking custody permissions alongside Part 4A authorisation |
| Remaining elements of the stablecoin regime | HM Treasury is consulting on payment services changes and licensing carve-outs | A live dependency for firms using stablecoins or tokenised deposits as a settlement mechanism |
| Crypto resolution regime | Not yet finalised by the FCA | Relevant to wind-down and resolution planning expected of authorised firms |
| Central Securities Depositories Regulation review | Ongoing review by HM Treasury, the Bank of England and the FCA | May affect the market infrastructure choices firms make when designing their post-authorisation operating models |
Of these, the PRA’s deferral of a permanent prudential framework to at least 2028 is the most significant scheduling gap: firms authorised from October 2027 onward will operate for a period under interim prudential expectations only, pending the outcome of the Basel Committee’s targeted cryptoasset review. This should be flagged explicitly in any client-facing gap analysis or implementation playbook, since it affects capital planning rather than conduct compliance alone.
4. The UK cannot replicate the US “no-action letter” bridge
The report notes that UK Authorities cannot waive statutory requirements or remove liabilities through a mechanism equivalent to the US SEC’s no-action letters; equivalent flexibility in the UK requires formal legislative modification, which is the mechanism used for the DSS. By contrast, the US SEC’s December 2025 no-action letter permitting the Depository Trust Company’s three-year tokenisation pilot allowed US market infrastructure to move to live products more quickly than the DSS route currently allows. Firms benchmarking UK authorisation timelines against US or other international peers should be aware that the comparison is not like-for-like, and that the DSS glidepath, not a no-action equivalent, is the UK’s functional substitute.
Indicative timeline
The following dates draw on both the FCA’s published regime and the Champion’s report. Firms should treat the DIGIT and repo trial dates as targets rather than confirmed deadlines, since both are contingent on further Authorities’ action.
| Date | Milestone |
|---|---|
| 4 September 2026 | Deadline for industry feedback on the Wholesale Digital Markets Champion’s first report |
| 30 September 2026 | FCA opens the Part 4A authorisation gateway for cryptoasset firms under PS26/11 and PS26/12 |
| Q1 2027 – target | Government pilot issuance of DIGIT, intended to demonstrate live secondary-market trading |
| Spring 2027 – aim | Taskforce aims to complete a live, end-to-end blockchain-based repo trial |
| October 2027 | PS26/11 and PS26/12 cryptoasset regime formally commences |
| From 2028 | Earliest expected introduction of the PRA’s permanent prudential framework for tokenised assets and stablecoins |
Implications for financial institutions and asset managers
• Sequence authorisation and market participation planning together. Firms planning to engage with DIGIT, GBTD or DSS-linked activity should map these against their own Part 4A application timeline rather than assuming the two proceed independently.
• Revisit capital planning assumptions given the PRA prudential deferral. Firms should not assume permanent capital treatment for tokenised asset exposures will be settled before regime commencement in October 2027.
• Clarify which gateway applies to which activity. Firms with both general cryptoasset ambitions and specific tokenised securities use cases may need to run Part 4A authorisation and DSS engagement as parallel, distinct workstreams.
• Track the Table 2 dependencies as a standing agenda item. Settlement finality, custody policy and the stablecoin regime’s remaining elements are all live and moving; firms should not treat PS26/11/12 as the final word on their regulatory perimeter.
• Engage before 4 September 2026. The Champion’s Taskforce is inviting industry feedback ahead of that date, particularly from firms not yet engaged in its Action Groups; this is a live opportunity to shape the roadmap rather than simply respond to it later.
About the Author
Eric is a Senior Advisor in our Change & Transformation practice with deep expertise in Digital Transformation, Risk and Compliance, having led risk, compliance, and regulatory affairs across Tier-1 institutions and capital markets. A former FCA Manager and founding member of the FCA Crypto Committee, he specialises in navigating regulatory change, strengthening governance and risk frameworks, and safely adopting emerging technologies in increasingly complex operating environments..
