Cryptoasset authorisation: wind-down planning a prerequisite

The FCA’s cryptoasset authorisation gateway opened on 30 September 2026 and closes on 28 February 2027, ahead of the full regime taking effect on 25 October 2027. Firms carrying out regulated cryptoasset activities to UK customers should now apply for authorisation or plan an orderly exit. This includes the following activities: 

• Operating a cryptoasset trading platform 
• Dealing in cryptoassets as principal or agent 
• Arranging deals in cryptoassets 
• Safeguarding qualifying cryptoassets 
• Issuing a qualifying stablecoin 
• Arranging qualifying cryptoasset staking

Central to that application is a requirement to produce a wind-down plan (WDP) that explains how the business could be wound down without creating undue consumer harm or market disruption.

Firms that do not apply for authorisation, or that are refused, need to have executed an orderly wind-down before 25 October 2027. 

Wind-down planning is not a new concept to UK financial services entities, but it is new to most cryptoasset firms. The FCA has already shown in other subsectors that it will proactively intervene where WDPs do not meet regulatory expectations. We have recent experience of supporting FCA-regulated firms where they have been required to enhance their WDP. A credible, funded and tested wind-down plan is part of demonstrating suitability as an applicant, and it takes time to prepare one properly.

The main components of a wind-down plan

A wind-down plan includes two main components: 

1)    The operational plan of how you would exit, and 

2)    Analysis of what the wind-down and exit would cost. This feeds into the requirement that firms hold sufficient capital and liquid assets to implement an orderly wind-down. It also informs the firm's overall risk assessment, which determines how much capital and liquidity the firm needs to hold above the regulatory minimum. 

The operational plan 

Scenario analysis: This should include both solvent and insolvent wind-down scenarios. Firms should include wind-down triggers (for example reserve depletion, concentration in illiquid tokens and key-holder departures). For the insolvent scenario, firms should not assume a crypto-specific resolution regime will be available (the FCA has so far only signalled a future consultation on the resolution of crypto custodians). The plan should show how client assets would be identified, protected and returned through a standard insolvency process.

Governance: Agree who owns and can activate the plan, name a wind-down director who would remain in situ for the full execution of the wind-down, and evidence board oversight through minutes and working group records. Set a timetable for periodic review of the WDP to ensure that it remains fit for purpose and reflects current business operations. Test the plan through a simulation or dry-run exercise and record the lessons learned.

Return of client assets: Maintain named signatories, test key-recovery procedures and retention arrangements for anyone who holds or can authorise private keys. Reconcile customer entitlements to on-chain and off-chain holdings, and confirm whether assets are held on trust or on the firm's own balance sheet.

Staked and lent assets: Identify assets that are staked, lent or otherwise deployed, and the unbonding, notice or recall periods that apply. These can add days or weeks to the timeline for returning client assets and should be reflected in both the operational plan and the liquidity model.

Critical third parties and dependencies: Map reliance on custodians, banking and payment provider dependencies and overseas group entities, and test what happens if any of those arrangements are withdrawn or frozen.

Customer and FCA engagement: Preserve transaction histories customers need to substantiate claims. Confirm who retains regulated roles during wind-down, when authorisation would be cancelled, and how the FCA would be notified and kept updated. Set out how unclaimed or residual balances will be handled, including how long the firm will try to contact customers and what ultimately happens to unreturned assets.

Management information (MI) and early warning indicators: Include and proactively monitor forward-looking MI to identify early warning signs. This allows management to act early to mitigate emerging risks or reduce the impact of any wind-down.

Communications: Prepare communications in advance, including warnings on the scam risk that closure announcements typically attract.

The liquidity model

A WDP needs to analyse and document assumptions about the resources required to deliver an orderly wind-down, including the return of all customer funds. This should include realistic balance sheet, cash flow and liquidity forecasts for each legal entity. Thought should be given to:

Cash flow and liquidity: Throughout the wind-down process, up to the cancellation of permissions, firms should forecast cash flow and liquidity. This should cover scenarios where a firm undertakes a solvent exit, as well as winding down due to an unexpected crisis or insolvency.

Extra wind-down costs: A solvent exit process generally takes longer and costs more than expected. It is important to consider the cost of retention or redundancy payments for key individuals, how key tech platforms will be maintained (and decommissioned), and the cost of external advisers supporting the process.

Asset realisations: Consider price volatility between valuation and sale, thin liquidity in certain tokens, and any lock-up or vesting restrictions that could delay conversion to cash.

Stress and reverse stress testing: Assess the impact of severe macroeconomic or firm-specific shocks on capital, liquidity, and resources. For example, testing the platform's ability to process the volume of withdrawal requests a closure announcement would trigger, not just business-as-usual volumes.

The FCA will require firms to hold liquid assets above a liquid asset threshold requirement, set to cover funding needs in business-as-usual and stressed conditions and to support an orderly wind-down. In practice, firms should expect this to mean holding liquid assets of at least one month's operating expenses.

This summer's crypto exits show what a disorderly exit can look like

In 2026 alone, more than 100 digital asset firms have exited the UK and international markets, including AscendEX, BitMEX and BitMart. My previous insight ‘Cryptoasset market exits: Wind-down lessons before the UK's authorisation gateway opens’ looks at the issues these exits exposed: withdrawal capacity that couldn't cope with the volume a closure announcement generates, warnings that some users may not recover their full balances, client assets frozen with custodians and payment providers with no practical recovery route, and reserves that had visibly deteriorated for weeks with no evidence a defined trigger had been monitored.

A properly tested WDP is designed to prevent these issues from occurring and to ensure key triggers are monitored, giving early warning so that action can be taken to mitigate the impact.

Where firms' WDPs typically fall short

The FCA has reviewed and provided feedback on WDPs across the payments, e-money and insurance sectors. Common issues include:

• Limited financial modelling throughout the wind-down process. For example, limited or no consideration of the impact on capital from changes to revenues and costs, or the impact on liquidity constraints to execute the plan.
• Assuming key risks would not crystallise during wind-down and WDPs not testing the impact of stresses that could take place after a wind-down has started.
• No consideration of how the wind-down timeline could be delayed by issues such as safeguarding, financial crime or contacting customers.
• Undue reliance on group WDPs or resources. Companies that are part of a group or that rely upon third-party outsourcing often fail to consider the impact on the deliverability of wind-down actions.

Each stage of a wind-down plan requires management to exercise and document their judgement on the appropriate level of granularity to include, as well as their readiness to implement each part of the plan. This means asking at each stage:

1. What still needs to be done?
2. How long will it take?
3. What financial and non-financial resources are required?

How we can help

We help regulated firms build, develop and write their wind-down plans, drawing on assumptions grounded in live appointments across financial services. That combination of wind-down credentials and direct digital asset experience means our advice reflects what happens in practice.

A WDP is a key part of the authorisation process, but it takes real time and rigour to build a credible plan. Firms should start preparing now. 

For more information or advice, contact Russell Simpson.