FCA proposes new guidance on crypto wallet checks and analytics

The Financial Conduct Authority has released a set of proposed guidelines aimed at curbing crypto related crime. These rules focus heavily on wallet verification and the application of blockchain analytics to identify illicit activity. As the sector matures in 2026, the regulator wants to ensure that firms operating in the space have clear protocols for monitoring transactions and verifying the owners of external wallets.

The new guidance mandates that service providers implement stricter screening processes for incoming and outgoing transfers. This means that firms must now use advanced blockchain analytics tools to trace the origins of funds in real time. If a wallet is associated with known mixing services or suspicious entities, the platform is expected to flag or block the transaction to prevent money laundering.

For many crypto companies, this represents a significant operational shift. While large exchanges already use some form of chain analysis, the FCA proposal sets a higher standard for documentation and reporting. Firms will now need to prove that they are performing regular audits of their wallet interactions and that their automated systems are capable of identifying complex obfuscation techniques used by bad actors.

Critics of the proposal argue that these measures could hamper privacy and increase the compliance burden on smaller companies. However, the regulator maintains that these checks are necessary to protect the integrity of the financial system. By forcing companies to take a more active role in monitoring their user base, the FCA hopes to reduce the prevalence of scams and hacks that have tarnished the reputation of the industry.

As the comment period for these proposals begins, industry leaders are preparing their responses to ensure that the final rules remain practical. It is expected that by late 2026, firms will be required to demonstrate full compliance to maintain their operating licenses. This move signals a permanent change in how crypto businesses interact with regulators, moving toward a more transparent and monitored environment for all market participants.