FCA Handbook - CASS 17.1 Application

You are viewing CASS 17.1 Application as it appeared on 25/10/2027. The current version of CASS 17.1 Application was last updated on 25/10/2027.

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CASS 17.1 Application

Subject to CASS 17.1.3R, this chapter (the cryptoasset safeguarding rules) applies to a firm in relation to regulated activities carried on by it from an establishment in the UK.

(1) Specific sections within the cryptoasset safeguarding rules have a narrower application than that set out in CASS 17.1.1R.
(2) CASS 17.3 (Cryptoasset safeguarding trusts) applies to a firm when it is safeguarding cryptoassets. The rule at CASS 17.3.3R requires the firm to act as a trustee when it is safeguarding cryptoassets, subject to certain exceptions which are set out in subsequent rules in that section. The rule at CASS 17.3.20R permits the firm to hold other cryptoassets within the same trust or trusts, as an operational surplus, and subject to certain conditions. Cryptoassets that are required or permitted to be in trust under those provisions of CASS 17.3 (Cryptoasset safeguarding trusts) are termed ‘client cryptoassets’ in the cryptoasset safeguarding rules.
(3) CASS 17.2 (General safeguarding requirements), CASS 17.4 (Means of access) and CASS 17.5 (Records of cryptoassets and reconciliations) apply to a firm when it is, as a trustee under CASS 17.3.3R, safeguarding cryptoassets which are client cryptoassets (and therefore including any operational surplus that is permitted under CASS 17.3.20R).
(4) In addition, CASS 17.2 (General safeguarding requirements) and CASS 17.4 (Means of access) apply to a firm when it is safeguarding cryptoassets but not treating them as client cryptoassets, in reliance upon CASS 17.3.12R.
(5) CASS 17.6 (Appointing third parties to safeguard cryptoassets) applies to a firm when it is both safeguarding cryptoassets and arranging cryptoasset safeguarding in relation to the same client cryptoassets.
(6) CASS 17.7 (Arranging cryptoasset safeguarding) applies to a firm when it merely arranges cryptoasset safeguarding.

This chapter does not apply to a UK QCATP operator which is an overseas firm and whose Part 4A permission for cryptoasset safeguarding is subject to a requirement (or a requirement imposed under section 55L(5) of the Act) to:

(1) not carry on the regulated activity of cryptoasset safeguarding other than by having control of qualifying cryptoassets to facilitate the settlement of transactions executed on a UK QCATP; and
(2) in the course of carrying on the regulated activity of cryptoasset safeguarding in accordance with (1), not accept any qualifying cryptoassets from any UK user other than qualifying cryptoassets received via a member of its group who is subject to, and acting in accordance with, CASS 17.3.5R.

(1) The exemption at CASS 17.1.3R permits a UK QCATP operator whose settlement arrangements would involve the regulated activity of cryptoasset safeguarding (for example, because users of the UK QCATP have a right against the UK QCATP operator for the return of cryptoassets) to not have to treat qualifying cryptoassets which it controls as part of those settlement arrangements as client cryptoassets.
(2) The exemption at CASS 17.1.3R only applies to a UK QCATP operator if its Part 4A permission is subject to a requirement, either at the FCA’s own initiative or following the voluntary application by the firm, in the terms set out at CASS 17.1.3R(1) and (2).
(3) The effect of the part of that requirement which is set out at CASS 17.1.3R(2), together with CASS 17.3.5R, is to limit the amount of qualifying cryptoassets which would be owed to UK users in respect of which CASS 17 would not apply.

(1) The defined term ‘cryptoasset safeguarding class’ is an important concept in the cryptoasset safeguarding rules and rules related to safeguarding cryptoassets (for example, in the reporting requirements at SUP 16.35.7R). Examples and further guidance to show the effect of this term are set out below.
(2) For example, two qualifying stablecoins which are both instances of the same qualifying stablecoin product should not, for the purpose of the cryptoasset safeguarding rules and rules related to safeguarding cryptoassets, be considered to be in the same ‘cryptoasset safeguarding class’ unless they exist on the same network that uses distributed ledger technology (eg, blockchain).
(3) Similarly, two qualifying cryptoassets should not be considered as falling within the same ‘cryptoasset safeguarding class’ unless they are both instances of the same single product. This means that a wrapped token or a liquid staking token would not fall within the same ‘cryptoasset safeguarding class’ as the relevant underlying cryptoasset.
(4) A consequence of this is likely to be that if a firm is carrying on safeguarding cryptoassets in relation to a client cryptoasset of a particular cryptoasset safeguarding class, it would not, without the client’s agreement, be able to discharge its safeguarding obligations to its client by returning a cryptoasset that is identical to the one being safeguarded but for the fact that it exists on a different blockchain.
(5) Where the cryptoasset safeguarding rules require a firm to make a record or a notification that refers to a cryptoasset safeguarding class, the firm may be able to use the Digital Token Identifier system outlined in ISO standard 24165, provided that, in doing so, the relevant cryptoasset safeguarding class can be precisely distinguished.

Requirement to act compatibly with the Consumer Duty

(1) When applying the cryptoasset safeguarding rules in relation to a firm’s retail market business, the firm must act compatibly with the Consumer Duty.
(2) A contravention of (1) does not give rise to a right of action by a private person under section 138D of the Act (and CASS 17.1.6R(1) is specified under section 138D(3) of the Act as a provision giving rise to no such right of action).

Exception for relevant specified investment cryptoassets

This chapter (the cryptoasset safeguarding rules) does not apply to a firm in relation to any safeguarding cryptoassets activity or any arranging cryptoasset safeguarding activity where the cryptoassets in respect of which the firm is carrying on safeguarding cryptoassets or arranging cryptoasset safeguarding (as applicable) are relevant specified investment cryptoassets.

Point In Time

25/10/2027