The UK's payments regulatory framework may be about to undergo its most significant overhaul since the introduction of the Payment Services Regulations 2017 (PSRs). HM Treasury is consulting on plans to modernise the regulation of payment services and electronic money, with a particular focus on tokenised payments, stablecoins, Open Banking and emerging AI-powered payment models.
The government argues that the PSRs and Electronic Money Regulations 2011 (EMRs) have successfully supported innovation and competition, helping to create a market that now includes almost 1,200 authorised or registered firms. However, technological developments, including blockchain-based payments, Open Banking, tokenisation and AI, are challenging a regime that was largely designed before these developments emerged.
The consultation forms part of the government's wider National Payments Vision and follows the planned consolidation of the Payment Systems Regulator into the FCA. The stated objective is to create a regulatory framework that remains proportionate and protective while being capable of adapting more quickly to technological change.
Moving regulatory responsibility to FCA
One of the consultation's most important themes is the potential redistribution of regulatory responsibilities between Parliament and the FCA.
HM Treasury is considering whether many of the detailed requirements currently contained in the PSRs and EMRs should be removed from legislation and instead set through FCA rules. The government argues that this could create a more agile, outcomes-focused framework that is easier to update as payment technologies evolve. At the same time, core elements of the regime would remain in legislation, including:
- the regulatory perimeter;
- key definitions such as "electronic money";
- important consumer protections;
- fundamental rights and obligations.
Bringing stablecoins into the payments perimeter
The government intends to bring within the UK payments framework stablecoins that are issued in the UK under the new cryptoasset regime or originate from jurisdictions that HM Treasury formally recognises as delivering equivalent regulatory outcomes. These stablecoins would be treated as sufficiently "money-like" to be used within regulated payment chains.
By contrast, overseas-issued stablecoins that do not meet those criteria would remain subject to the broader cryptoasset framework rather than payments regulation.
This approach seeks to balance innovation with confidence. It reflects the government's view that stablecoins can support faster and cheaper payments, particularly cross-border payments, while requiring robust backing and regulatory standards to address risks such as de-pegging and loss of consumer confidence.
Tokenised payments
HM Treasury proposes a framework capable of accommodating both tokenised deposits and tokenised payment arrangements more generally. It intends that the same core regulated payment activities should apply regardless of whether a payment is made using traditional fiat money, stablecoins or tokenised deposits. Firms would therefore operate within a single framework covering both conventional and tokenised payment services.
However, existing payment firms wishing to offer tokenised payment services would generally need an FCA variation of permission, allowing regulators to assess whether firms have appropriate systems and controls to manage any distinct risks associated with tokenised assets.
The consultation also raises questions about whether existing conduct, safeguarding and prudential requirements are suitable for tokenised payments and whether reforms will be needed to facilitate smart contracts and programmable payments.
Agentic payments
HM Treasury sees significant potential in AI agents that can act on behalf of consumers and businesses to analyse options, make purchasing decisions and execute payments autonomously. According to the consultation, this could fundamentally reshape commerce by reducing friction, improving efficiency and creating new business models.
The government acknowledges, however, that today's payment services framework was not designed with autonomous AI systems in mind. It therefore invites responses on whether existing concepts such as authentication, consent and liability for unauthorised transactions remain fit for purpose in an AI-enabled payments environment.
Open Banking
The consultation also outlines a long-term regulatory model for Open Banking, consistent with the government's ambition to expand account-to-account payments and support wider smart data initiatives. A key proposal is the creation of a new statutory "right of access" to support variable recurring payments (VRPs), which are viewed as an important building block for future account-to-account payment solutions. Alongside this, HM Treasury intends to use powers under the Data (Use and Access) Act 2025 to establish a future Open Banking framework overseen by the FCA. The regulator would receive extensive powers covering:
- API standards;
- participation requirements;
- pricing arrangements;
- funding arrangements;
- governance standards;
- dispute resolution processes.
Open Banking pricing
Currently, Open Banking access rights are effectively provided free of charge. While this has supported fintech growth, the government acknowledges concerns that the model provides limited incentives for banks to invest in infrastructure and innovation. HM Treasury therefore proposes giving the FCA powers to oversee pricing arrangements and, potentially, allow charging for some forms of access. The regulator could also intervene directly where pricing arrangements create competition or market concerns.
Governance and financial crime
The consultation also reflects growing regulatory concern about risks in the payments sector. HM Treasury notes that the expansion and diversification of payment firms has increased complexity and created new opportunities for financial crime. It therefore seeks views on whether enhanced accountability mechanisms, including greater responsibility for senior managers within payment and electronic money institutions, may be appropriate. Governance and accountability may become increasingly important themes as the sector continues to grow.
The consultation ends on 6 October 2026.
