Payments Meet the Future: HM Treasury's New Package to Modernise UK Payment Services Regulation

On 21 April 2026, coinciding with London's Fintech Week, HM Treasury released a package of measures to modernise UK payments regulation including:

• the Financial Services and Markets Act 2000 (Cryptoassets) (Amendment) Regulations 2026 (the draft SI), together with a policy note; and
• the government’s response to its 8 September 2025 consultation paper on a streamlined approach to payment systems regulation.

Alongside these publications, the government also announced a significant policy shift: it now intends to regulate stablecoin payments as payment services where stablecoins used for such payments have been issued by a firm that is authorised to carry on the new regulated activity of qualifying stablecoin issuance under Article 9M of the RAO. 

In this post, we have: (i) summarised the impact of the now confirmed policy shift to regulate certain stablecoin payments as payment services; and (ii) identified key takeaways from the draft SI for stablecoin payments firms.

Modernisation of payment services regulation

HMT has announced that it intends to improve the regulation of payment services and e-money by integrating it with the UK’s core regulatory approach for financial services.  This has long been expected (see HMT paper on Building a Smarter Financial Services Regulatory Framework for the UK from July 2023) but we have yet to see the detail – a consultation is expected to be published in Q2 2026 (the Q2 Consultation). In due course, the Payment Services Regulations 2017 (PSRs) and the Electronic Money Regulations 2011 (EMRs) (on which the current regime are based) will be revoked and we expect this to be replaced by high-level legislation with the detail being fleshed out by FCA rules. As flagged in the February 2026 Payments Forward Plan, HMT will consult on its review of assimilated payments services law as part of the Q2 Consultation before laying a related statutory instrument before Parliament at some point between 2027 and 2028, which is expected to formally commence revocation of the PSRs and EMRs. 

Stablecoin payments to be regulated as payment services

The UK government has stated that it will consult on regulating stablecoins for their use in payments, where stablecoins have been issued under the forthcoming new regulated activity for qualifying stablecoin issuance in the UK. This announcement signals an about-turn from the government, which indicated only a couple of months ago that it had chosen not to bring qualifying stablecoin payments within the regulatory perimeter for payment services (see  our previous blog post on the policy decisions underpinning the UK cryptoasset regime). While the precise details will not be fleshed out until the Q2 Consultation is published, the draft SI contains clearly drafted measures that will have an impact on stablecoin payments firms in the near future (as explained below). 

As a related point, cryptoasset firms should take note of the fact that all rules proposed by the FCA prior to the draft SI’s publication – including the FCA’s recently proposed cryptoasset perimeter guidance – do not reflect HM Treasury’s recent decision to regulate certain stablecoin payments as payment services.

What the draft SI means for stablecoin payments firms

Without appropriate amendments, the incoming Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (the Cryptoasset Regulations) together with the reform of the payment services regime has the potential to result in stablecoin payments firms needing to be authorised under multiple regimes. The complexity for stablecoin payments firms is exacerbated by the fact both the forthcoming cryptoasset framework and the reformed payment services regime are yet to be finalised. To reduce complexity for certain firms, the draft SI would amend the Cryptoasset Regulations to carve out UK qualifying stablecoins (UKQS) from certain regulated activities – namely, the new regulated activities of dealing in qualifying cryptoassets as principal and as agent as well as arranging deals in qualifying cryptoassets. 

The government’s proposed approach is an interim measure that takes firms outside the cryptoasset regulatory perimeter until they are brought into the regulated payments perimeter. However, stablecoin payments firms should note that the scope of the draft SI’s UKQS carve-out is limited to UKQS and only to arranging and dealing activities. We note the following:

• UKQS lending and borrowing: lending and borrowing involving UKQS would remain within scope of the qualifying cryptoasset dealing and arranging activities. The government acknowledges this could create friction where UKQS are used in collateral arrangements, and will seek industry input on how best to mitigate barriers in the Q2 Consultation.
• Non-UKQS payments: overseas-issued stablecoins would remain inside the qualifying cryptoasset dealing and arranging perimeter. The policy note acknowledges that firms relying on overseas-issued stablecoins for cross-border payment use cases may therefore face residual frictions, depending on how transactions are structured. The Q2 Consultation will explore the considerations such firms should take into account when assessing whether authorisation is required under the cryptoasset regime.
• UKQS safeguarding: the carve-out from dealing and arranging does not remove the requirement to obtain regulatory permissions where such firms safeguard, or arrange for another to safeguard, qualifying cryptoassets – including UKQS – on behalf of another. The government will be consulting on a proposal that, under the payments services reforms, safeguarding undertaken in the course of providing payments services should sit within the payments regime rather than the cryptoasset regime.

A number of related provisions in the Cryptoasset Regulations are also clarified by the draft SI and the related policy note:

• Temporary settlement safeguarding exclusion: the Cryptoasset Regulations contain a temporary settlement exclusion for firms that hold qualifying cryptoassets “temporarily to facilitate the settlement of a transaction.” The policy note clarifies that this exclusion was only ever intended to apply where the activity is ancillary to dealing or arranging, and therefore confirms it does not apply to UKQS held in the course of providing payment services.  
• Financial promotions: the government intends to make changes to the perimeter for the financial promotions regime so that it remains in line with the cryptoasset regime’s regulated activities. That means that payment transactions only involving UKQS (other than lending and borrowing) will not be subject to the financial promotions regime. The regulated activity of issuing a qualifying stablecoin will, however, be added as a controlled activity under the Financial Promotions Order.
• MLR Gateway registration: firms providing UKQS services only — and therefore not holding a Part 4A permission — may still be required to register with the FCA under the Money Laundering Regulations 2017 to ensure compliance with AML obligations.
• Early activation of CIS/AIF exclusion for stablecoin backing assets: the government intends to bring forward implementation of the provisions excluding stablecoin backing assets from the definitions of collective investment schemes and alternative investment funds, ahead of those provisions otherwise coming into force in October 2027. Under the proposals, this exclusion would come into force thirty days after the draft SI is implemented rather than 25 October 2027 with the bulk of the Cryptoasset Regulations. This is intended to circumvent barriers to stablecoin adoption across a range of use cases.
• New proprietary trading/market-making exclusion: a new exclusion is introduced for firms dealing in qualifying cryptoassets as principal where the firm is not providing a service to a client related to a regulated activity that the firm carries on for that client. This directly addresses the potential competitive imbalance where an overseas firm could provide liquidity to a UK-authorised cryptoasset trading platform without needing UK authorisation, while a UK-based firm in the same position requires FCA permissions. The exclusion is intended to prevent activity being pushed offshore.
• CSD exemption corrected for tokenised securities: the existing exemption in the Cryptoasset Regulations for recognised central securities depositories does not extend to cryptoasset safeguarding carried on by CSD nominees. The SI partially addresses this discrepancy by extending the exemption to CSD nominees safeguarding specified investment cryptoassets – like tokenised securities – although it does not extend the exemption to a CSD’s nominee safeguarding qualifying cryptoassets more broadly.