By CRYPTOVERSE Legal Consultancy
An overseas crypto exchange is preparing to enter the UK. Its finance director favours a branch: one company, shared infrastructure and access to the existing global order book.
Its legal team proposes a UK subsidiary. Its operations team asks whether customer assets would stay with the overseas company.
The board initially treats this as an incorporation decision. Then the application preparation reveals a more consequential question: which entity will perform each regulated activity, and can the FCA effectively supervise that arrangement?
The FCA’s baseline expectation is that firms requiring authorisation for regulated cryptoasset activities operate through a UK legal entity. Limited branch arrangements may be available, particularly for qualifying cryptoasset trading platforms. The choice must follow the proposed activities and applicable conditions.
First establish whether UK authorisation is required
Before comparing structures, assess the business’s UK regulatory perimeter.
The FCA’s territorial guidance requires consideration of ordinary UK territorial principles and, where applicable, the additional deeming provisions in FSMA section 418. Certain overseas activities involving UK consumers can fall within UK scope.
Map the services, customers and transaction chains.
A useful assessment should explain:
- What each entity does.
- Where those activities occur.
- Who contracts with customers.
- Who executes transactions.
- Who controls assets.
- Which exclusions or exemptions are relevant.
An overseas firm should not assume that serving UK customers necessarily requires incorporating a subsidiary. Equally, overseas incorporation alone does not resolve its UK obligations.
What is the practical difference?
A subsidiary and a branch create different legal and operational relationships.
| Issue | UK subsidiary | UK branch |
| Legal identity | Separate UK company | Part of the overseas company |
| Contracting | Contracts can be entered into by the subsidiary | Contracts are obligations of the overseas company |
| Management | Responsibilities must be allocated to the subsidiary | UK responsibilities sit within the overseas entity |
| Funding | Resources must be made available to the subsidiary | Resources sit within the overseas entity’s arrangements |
| Group services | Intercompany dependencies require documentation | Overseas-office dependencies still require clear oversight |
A branch has no separate legal personality.
These differences should inform the regulatory analysis, customer contracts and funding plan. Neither structure automatically provides effective controls.
When might a trading platform branch be appropriate?
The FCA identifies a potential branch route for qualifying cryptoasset trading platforms where access to global liquidity supports better execution outcomes.
The applicant must justify the structure. The FCA assesses home-state regulatory comparability; a letter of good standing alone is insufficient. For branch authorisation, the applicant is the overseas firm, including its UK and overseas offices.
In our scenario, the exchange should substantiate its liquidity argument.
Useful evidence might include:
- How orders interact across markets.
- The effect of separate order books.
- Execution quality analysis.
- Settlement arrangements.
- Operational and supervisory access.
- Risks introduced by the proposed structure.
“Global liquidity” should lead to an explanation of customer outcomes and controls, rather than remain a phrase in the business plan.
A platform branch does not settle every permission
The guidance describes conditional branch possibilities for restricted matched principal dealing on the platform and restricted settlement-wallet safeguarding. These are limited arrangements, rather than general permissions for proprietary dealing or custody.
A firm should therefore assess each proposed service separately.
For example, distinguish:
- Operation of the trading platform.
- Customer brokerage.
- Principal trading.
- Settlement-related asset control.
- Ongoing customer custody.
- Other products offered through the same application.
The fact that customers see one interface does not mean every underlying activity belongs in one entity or qualifies for the same structural treatment.
Could a subsidiary and branch work together?
A group may consider allocating different functions to a UK subsidiary and an overseas firm’s UK branch.
Treat that possibility as a model to assess, rather than an approved template.
Prepare a responsibility matrix showing:
| Function | Questions to resolve |
| Customer onboarding | Which entity accepts the customer? |
| Trading access | Which entity provides the service? |
| Execution | Who executes and in what capacity? |
| Asset holding | Who controls assets and owes safeguarding obligations? |
| Settlement | How do assets and instructions move between entities? |
| Complaints | Who handles the issue and provides any remedy? |
| Incidents | Who can suspend activity and coordinate the response? |
Explain the resulting customer journey in plain language.
A combined structure becomes difficult to defend if management cannot identify the responsible entity when a withdrawal fails or a transaction is disputed.
Consider dual-regulated firms separately
FCA/PRA dual-regulated firms are addressed separately in the guidance. Branch operation may be acceptable where threshold conditions are demonstrated, subject to case-by-case assessment.
A banking group should therefore assess its position with reference to the relevant regulators and existing permissions.
Avoid treating the general approach for an FCA solo-regulated crypto startup as an automatic answer for a dual-regulated institution.
Make the structure credible in practice
The FCA’s crypto standards address governance, resources, suitability and the business model. Incorporation documents alone do not demonstrate those features. FCA
For practical preparation, ask:
- Who makes product and risk decisions?
- Who can challenge group instructions?
- Who approves exceptions?
- Who can suspend withdrawals or trading?
- Who supplies information to the regulator?
- What happens if an overseas team is unavailable?
A UK subsidiary should have meaningful arrangements for its responsibilities. A branch should have clear authority and access within the overseas firm.
Document those arrangements through reporting lines, delegated authority, contracts and operational evidence.
Follow the customer assets through a failure scenario
A useful structural review should examine what happens if the business or an important provider fails.
Consider:
- The entity against which customers have rights.
- Where assets are held.
- Who controls transfer and recovery.
- Applicable contractual and property arrangements.
- Relevant insolvency issues.
- Access to records.
- The practical process for returning assets.
Obtain appropriate legal analysis where arrangements span jurisdictions.
For our hypothetical exchange, this exercise may reveal that the proposed custody model needs separate consideration from the order-book model. A benefit associated with execution should not obscure unresolved asset-recovery questions.
Budget for the actual applicant
The FCA’s prudential framework addresses capital, liquidity and risk assessment, including interactions with other prudential regimes.
Compare the structures using a realistic resource model.
Include:
- Personnel and compliance.
- Technology and group service charges.
- Legal and regulatory preparation.
- Operating losses during launch.
- Funding conditions.
- Stress and wind-down costs.
For a subsidiary, explain how funding reaches the applicant. For a branch, assess the relevant overseas entity’s arrangements.
A lower incorporation cost is a limited saving if the chosen structure subsequently requires redesigning contracts, systems and permission scope.
Decide the structure before finalising the application
The expanded regime is scheduled to commence on 25 October 2027. The relevant application period runs from 30 September 2026 to 28 February 2027. FCA
A recommended preparation sequence is:
- Complete the perimeter and activity assessment.
- Identify plausible entity structures.
- Evaluate any branch conditions.
- Map contracts, assets and responsibilities.
- Assess funding and operational dependencies.
- Obtain board approval for the selected model.
- Align the application documents.
In our scenario, the board returns to the decision with better evidence. It compares execution benefits, custody arrangements, supervisory access and resources.
That produces a reviewable structural rationale rather than a preference based mainly on convenience.
Structuring your UK expansion with CRYPTOVERSE
CRYPTOVERSE is a specialist legal and regulatory firm for UK FCA cryptoasset authorisation support.
CRYPTOVERSE can support activity assessments, subsidiary and branch analysis, responsibility mapping and preparation of the structural rationale for an application.
Choosing a UK structure for your crypto business? Contact CRYPTOVERSE to assess the permissions, conditions and operating arrangements relevant to your model.
FAQs
1. What is the difference between a UK crypto subsidiary and a branch?
A UK crypto subsidiary is a separate legal entity incorporated in the UK, while a branch is an extension of an overseas company without separate legal personality. This difference affects contracts, management responsibilities, funding and regulatory oversight.
2. Does an overseas crypto exchange need a UK subsidiary for FCA authorisation?
Not necessarily. The appropriate structure depends on the regulated activities, FCA requirements and applicable branch arrangements. Certain qualifying cryptoasset trading platforms may be eligible for a branch structure, subject to specific conditions.
3. Can an overseas crypto exchange operate a UK branch under FCA authorisation?
Yes, certain overseas crypto firms may be able to apply through a UK branch arrangement, particularly qualifying cryptoasset trading platforms. The FCA assesses factors such as home-state regulatory comparability, operational arrangements and the proposed business model.
4. Can a UK crypto branch provide custody and safeguarding services?
A qualifying platform branch may have access to limited settlement-wallet safeguarding arrangements, subject to specific conditions. This does not automatically permit unrestricted custody or general cryptoasset safeguarding services.
5. When should a crypto company decide between a UK subsidiary and branch?
A crypto company should assess its regulatory activities, customer contracts, asset arrangements, governance, funding and operational responsibilities before finalising its application structure. Early planning can help avoid unnecessary restructuring and regulatory delays.