A new Solana Research Institute analysis warns that the UK’s incoming crypto regulatory framework could make core blockchain infrastructure activities uneconomic for firms tied to the country, increasing the risk that validators, staking providers, wallet developers, and other infrastructure businesses relocate or restrict UK users.
UK Crypto Rules Risk Pushing Blockchain Firms Abroad
Angus Scott of the Solana Research Institute published the analysis on May 27, 2026, arguing that the UK is drifting toward what he calls a “crypto sakoku,” a reference to Japan’s historical isolationist policy. The note focuses on the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026, approved by Parliament in February 2026 and due to come into force in October 2027, which will extend the Financial Conduct Authority’s perimeter to certain crypto-related activities.
Scott frames the issue as a regulatory mismatch between traditional financial services and permissionless blockchain infrastructure. “The UK is implementing rules that will make participation in the basic operations of blockchain protocols uneconomic for firms connected to the country. The outcome will be that many UK-based firms quit either the country or the business, and non-UK firms exclude UK clients.” He adds that if British citizens cannot participate in basic crypto operations, “they will find it impossible to play a part in developing the higher-level applications that have the potential to transform finance.”
The analysis is especially critical of how the FCA’s perimeter guidance may treat delegated staking, liquid staking, and non-custodial wallet provision. Scott writes that regulators have relied on the principle of “same asset, same risk, same regulation,” but argues that the UK is applying that approach too broadly. “A security is a security, whatever the infrastructure on which it is issued. But if ‘same risk, same regulation’ applies to high-risk assets, it should apply equally to low-risk ones. If the risks are genuinely different, should not the regulatory treatment also be?”
FCA Staking and Wallet Plans Raise Exit Fears
The staking section of the analysis says the FCA’s proposed treatment could bring ordinary delegated staking services into the regulated perimeter through the category of “arranging cryptoasset staking.” Scott notes that Solana delegated staking leaves assets in the user’s own wallet, with the protocol locking them during each staking epoch, currently around two to three days, with a reduction to around one day planned later this year. Liquid staking tokens, or LSTs, are described as transferable representations of a claim on staked assets, redeemable after the staking period and governed by open-source smart contracts.
Scott argues that this structure does not map neatly onto term deposits, managed funds, or other traditional yield products. “There is no opportunity for the operator, or a malicious third party attacking the operator, to gain control of the asset or to use it for anything other than staking. Bugs in the stake program itself remain a theoretical risk, but this is a risk inherent to the underlying protocol and is borne equally by every holder of the asset, staked or not—it is not a risk that financial services authorisation of an operator could address.” The note also cites Ethereum slashing data, stating that fewer than 500 validator instances out of more than 1.2 million have been slashed since slashing went live in 2020, with most cases tied to operator configuration errors during key migrations rather than malicious conduct.
The wallet provisions raise a separate concern. The analysis says non-custodial wallets could fall within the perimeter where they provide users with tools to make, place, or send orders and receive transaction confirmations. Scott writes that this approach risks treating basic transaction-signing software as financial intermediation. “A wallet’s function is to construct, sign, and broadcast a message at the user’s direction. The order book, the matching engine, the price-time authority, and the fill all sit inside an autonomous smart contract on an open network, of which the wallet has no means of being aware, let alone influencing.” He argues that, taken to its logical endpoint, the same reasoning could extend to RPC providers, block explorers, hardware wallet makers, and browsers.
The cost estimates in the analysis illustrate why firms may reassess their UK exposure. Scott uses the example of a Solana validator with about 1.35 million SOL delegated to it, placing it at the lower end of the top decile by stake, and estimates annual revenue of roughly $250,000 to $400,000 from leader slot priority fees and a 10% commission on Jito MEV tips. FCA authorisation for a UK-based operator could involve one-off costs of about $70,000 to $170,000, separate regulatory capital of $100,000 to $200,000, and ongoing compliance costs of around $65,000 to $155,000 per year.
The analysis says those economics could be prohibitive for second-tier infrastructure operators. “The consequences are straightforward. UK-based operators will reconsider their location or whether to remain in business. Overseas operators will geofence the UK rather than incur the compliance burden for a sub-scale market.” Scott also argues that British users seeking wallet services from non-UK providers could find themselves blocked if firms decide the UK compliance burden is not commercially viable.
The broader concern is that the UK’s approach could diverge from other major jurisdictions at the infrastructure layer. Scott writes that the EU, Switzerland, and the US exempt non-custodial staking from regulation, while Singapore focuses more on regulating access than service providers. He says the wallet approach is particularly unusual by international standards and warns that rules making base-layer participation costly could weaken the UK’s stated ambition to become a global digital assets hub.
The Solana Research Institute analysis presents the FCA’s 2026 crypto perimeter as a test of whether the UK can regulate digital assets without capturing the software and infrastructure that make public blockchains usable. Its central warning is not that crypto should be outside oversight, but that treating validators, staking interfaces, and non-custodial wallets like conventional financial intermediaries may push builders and service providers to jurisdictions where core protocol participation remains economically viable.
AI Transparency Note: This article was prepared with the assistance of an AI system based on the sources listed and was reviewed, edited, and approved by a human editor before publication. All quotes, data points, and factual claims are intended to be grounded in the cited source material; however, errors cannot be ruled out entirely.