FCA Proposes Personal Wallet Checks in Nonbinding Crypto Guidance

TLDR

• The UK’s Financial Conduct Authority opened consultation CP26/38 on October 23, 2026, proposing updates to its Financial Crime Guide.
• Draft guidance lists enhanced due diligence on transfers involving unhosted, or personal, crypto wallets as good practice.
• The FCA calls it poor practice when firms use third-party risk scores they cannot explain or evidence.
• Rigid rules on how many transaction “hops” a firm traces are criticized when they ignore risk.
• The guidance is nonbinding, and feedback is due by December 24, 2026.

Britain’s Financial Conduct Authority (FCA) has proposed new guidance on how firms should check crypto transfers involving personal wallets. The proposals are part of a wider update to its Financial Crime Guide.

The regulator opened consultation CP26/38 on October 23, 2026. It is asking for feedback on the changes until December 24, 2026.

The draft guidance lists extra checks on transfers from unhosted wallets as good practice. It also criticizes firms that rely on risk scores they cannot explain.

What the FCA Proposes for Unhosted Wallets

An unhosted wallet is a personal crypto wallet that is not managed by an exchange or other firm. The owner holds the keys directly.

Draft section FCG 3.2.8 lists enhanced due diligence on transactions involving these wallets as an example of good practice. Enhanced due diligence means more intensive checks than standard reviews.

In practice, this concerns how a UK firm checks crypto that a customer sends in from a personal wallet. The focus is on the receiving firm’s process.

The guidance is nonbinding. The FCA says the Guide contains no rules and does not create new requirements.

The regulator still expects firms to read and consider the Guide when building their controls. Not following it would not, on its own, count as a breach of FCA rules.

Risk Scores and Tracing Rules

The proposals also cover how firms reach decisions about transfers. Draft section FCG 3.2.5 names a specific poor practice.

That practice is using third-party technology without being able to explain or provide evidence for how it reaches its findings or scores. The FCA says firms remain responsible for compliance even when they use outside suppliers.

The draft also criticizes rigid rules on how many transaction “hops,” or transfer steps, a firm examines. The problem the FCA points to is a tracing rule that ignores risk, not the use of a number limit itself.

These proposals sit on top of existing duties. Under the UK Travel Rule, crypto businesses have had to collect, verify and share transfer information since September 1, 2023.

The consultation covers more than crypto. It also proposes changes on fraud, sanctions, proliferation financing, data security, money laundering and terrorist financing.

The crypto changes are meant to reflect a new UK regime starting in October 2027. The FCA says it wants the Guide to keep pace with risks linked to AI, crypto assets and changing sanctions.

The regulator does not expect the updates to greatly raise compliance work or consumer costs. It describes the changes as clarifying existing expectations and established practice.

The consultation applies to all firms the FCA supervises for financial crime. This includes crypto asset businesses registered under the Money Laundering Regulations.

Firms and other interested parties can respond through an online form or by email until December 24, 2026. The FCA will then publish feedback and the final Guide text in a Policy Statement, though it has not given a date.

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