Modernising payment services regulation: the FCA in the ascendancy

On 14 July 2026, HM Treasury (HMT) published its consultation Modernising Payment Services Regulation, setting out the Government's intentions for the future regulation of payment services and electronic money. The consultation forms part of the Government’s broader agenda, announced at Mansion House 2025 and built upon through its National Payments Vision, to modernise the legislative framework towards “a more agile and responsive regulatory environment that promotes innovation in the UK payments sector.” The consultation is open for responses until 6 October 2026.

The consultation is wide-ranging, but read as a whole it is less about any single reform than about a change in approach: not just how payments are regulated, but who holds the pen. In this blog post, we draw out the themes we think matter most for firms including those relating to the payments framework, tokenised payments, agentic payments, and Open Banking.

The framework: legislation or delegation?

A core structural theme of the consultation is the Government’s willingness to remove detailed requirements from UK and onshored payments legislation (including but not limited to the Payment Services Regulations 2017 (PSRs) and the Electronic Money Regulations 2011 (EMRs)) and delegate rule-making to the Financial Conduct Authority (FCA). This reflects the Government’s approach in other areas of financial services regulation and is based on the premise that placing more detailed and technical provisions in regulatory rules “could support a more agile and outcomes-focused regime, drawing on the FCA's supervisory expertise and day-to-day engagement with firms.”

The Government also recognises the importance of maintaining “appropriate certainty and clarity” in the legislative framework. It therefore expects to retain certain core provisions in legislation, including the regulatory perimeter and fundamental legislative definitions, and which may well also include provisions establishing key rights, obligations and protections for consumers and firms. The Government has indicated it will work with the FCA to ensure that the regulator will have the necessary powers to replace relevant provisions with Handbook requirements.

The consultation invites views on the extent to which rule-making delegation should take place, as well as whether any updates to existing legislation would be desirable. 

Same risk, same regulatory outcome: tokenised and agentic payments

The consultation is consistent with the Government’s commitment to the “same risk, same regulatory outcome” approach, in seeking to apply existing regulatory frameworks to new technologies wherever appropriate. This is particularly evident in its proposals in relation to tokenised and agentic payments.

Tokenised payments

In light of the Government’s commitment to making the UK a world leader in tokenised payments, the consultation addresses plans for the regulation of tokenised deposits and stablecoins.

• Tokenised deposits: The Government’s approach is to regulate tokenised versions of financial instruments in the same way as their traditional counterparts as far as appropriate. The Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (the Cryptoasset Regulations) ensured that tokenised deposits fall within the established legal definition of a deposit under financial services law and are regulated accordingly. The Government is now seeking views on whether the existing regulatory framework presents barriers to tokenised deposits in retail payments and whether the current framework needs to adapt to unlock opportunities in this area.
• Stablecoins: In light of the Cryptoasset Regulations establishing the new UK regulated activity of stablecoin issuance, the Government is looking to bring certain UK-issued qualifying stablecoins within the payments perimeter, treating them as “money-like” for payments purposes. Interesting points from the consultation paper include:
  • Overseas-issued stablecoins will not be regulated under the payment services framework - instead, services in relation to them will be treated as new intermediary activities under the Financial Services and Markets Act 2000 (Regulated Activities Order) 2001.
  • However, the Government seems to be considering a potential recognition or equivalence regime applicable to overseas issued stablecoins, where HM Treasury has formally recognised the regulatory framework of that overseas jurisdiction as providing similar outcomes to the UK’s.
  • The Government is considering whether to permit UK stablecoin issuers to carry on stablecoin-related payment services without additional permissions (in line with the approach for credit institutions under the existing payments framework).
  • Carve-outs may be introduced to avoid transactions involving UK-issued stablecoins falling within both the planned payments regime and the new cryptoasset activities (i.e., so that firms do not need two sets of permissions for the same activity). The Government intends that exchanges of those UK-issued qualifying stablecoin for money, or other UK-issued qualifying stablecoin, will not be considered cryptoasset dealing, for example.
  • The Government is seeking to ensure that only the PSRs, and not the Cryptoasset Regulations, impose safeguarding and custody rules in relation to stablecoin payments. 

The Government has indicated that clarity on the interaction between the future payments regime and the cryptoasset regime should be available soon, as the consultation paper notes that this should be provided in advance of the applications window for the cryptoasset regime, which opens on 30 September 2026. 

In designing the new regime, the Government is conscious of not requiring firms to obtain separate permissions for providing fiat and tokenised payment services. As such, the Government proposes to restructure the regulated activities set out in Schedule 1 of the PSRs, merging some and splitting out others. This will create a consolidated set of regulated activities for payment services, which will all be able to be carried out in respect of both fiat and tokenised payments (although currently authorised/registered firms would still need a variation of permission to provide tokenised payment services). Firms should consider the impact of this revision of the regulated activities on their existing permissions, safeguarding rules and prudential treatment. The Government is also seeking views on whether the existing framework is appropriate for tokenised payments in terms of supporting innovation, conduct of business rules, and prudential requirements.

Agentic payments

The Government wants the UK to be a world leader in agentic payments (namely, payments in which AI agents “autonomously analyse, initiate, approve, and execute payments on behalf of consumers or firms”). 

Acknowledging that the PSRs may not fully facilitate the use of agentic AI given they were designed before the development of AI, the consultation seeks views on changes to the PSRs that are necessary to enable this ambition. Two particular areas of focus, which could put the Government’s “same risk, same rules” philosophy to the test, are authentication standards and liability for unauthorised payment transactions. 

In addition, the consultation seeks views on how agentic payments may need to be regulated in relation to financial inclusion and financial crime risks.

Open Banking

We have covered developments in Open Banking extensively in recent months, and so we touch on it only briefly here. At a high-level, the consultation covers: 

• Establishing a new right of access (to complement those that already exist in the PSRs and the CMA’s Retail Banking Market Investigation Order 2017) in relation to variable recurring payments.
• Legislative changes in relation to key definitions and the requirements regarding the information provided by Account Servicing Payment Service Providers (ASPSPs, e.g. banks) to Payment Initiation Service Providers (PISPs) in relation to the status of initiated payments.
• Empowering the FCA to:
  • develop and regulate the future framework for Open Banking under the Data (Use and Access) Act 2025 (the DUAA), including the power to impose requirements relating to interface use, standards and arrangements on ASPSPs, PISPs and Account Information Service Providers (AISPs);
  • regulate designated “interface bodies,” which include both the “Future Entity” (which is intended to replace Open Banking Limited as the body responsible for setting common Open Banking standards) and commercial Open Banking schemes, including their pricing, governance and funding; and
  • utilise new monitoring and enforcement powers (which will be closely modelled on the FCA's toolkit under the Financial Services and Markets Act 2000) in respect of interface bodies, ASPSPs, PISPs and AISPs.

The Government is also considering providing the FCA with an additional objective when exercising powers under the DUAA, which may be to support innovation or to enable the sharing of customer data and access to account functionality.

Looking ahead

Taken together, these wide-ranging proposals demonstrate the Government’s desire to create a payments framework that is more agile, more technology-neutral and more firmly in the hands of the FCA. That said, with many of these topics rapidly evolving and policymaking in the developmental stage, we expect this consultation to offer firms a genuine opportunity to influence the future of payments regulation in the UK.