HMT reshapes the future of payments

What does this mean?

Building an agile payments regulatory framework

HMT intends to retain the existing legislative framework for payment services and electronic money while delegating more detailed and technical requirements to the FCA. Core legislative provisions, including the regulatory perimeter, key definitions and certain statutory rights and protections, would remain in legislation.  

Views are sought on whether existing legislation and key definitions should be updated to reflect developments in the payments market. The existing Strong Customer Authentication provisions would be removed from the Payment Services Regulations and replaced by FCA rules.

Assessing business readiness for tokenised payments

The consultation includes proposals for tokenised payments, including stablecoins and tokenised deposits. Certain stablecoins used for payments would be brought within the payments regulatory perimeter. UK-issued qualifying stablecoins would be treated as "money-like" for payment purposes, while qualifying stablecoins issued in recognised overseas jurisdictions could receive equivalent treatment where the relevant regulatory framework delivers similar regulatory outcomes.  

HMT is also consulting on whether firms authorised to issue UK qualifying stablecoins should be able to provide payment services without separate payment permissions. Safeguarding undertaken in the course of providing payment services would ultimately fall within the payments regime rather than the cryptoasset safeguarding regime.

The payment services framework would be simplified by merging certain regulated activities and separating issuing payment instruments from acquiring payment transactions. A single set of regulated payment activities would apply to both fiat and tokenised payments. Existing authorised or registered firms would require an FCA variation of permission before providing tokenised payment services. Views are also sought on whether existing conduct, prudential and operational requirements should be adapted to support programmable payments and smart contracts.

Driving the next phase of Open Banking

HMT proposes a long-term regulatory framework under the Data (Use and Access) Act 2025. This includes a new statutory right of access to support variable recurring payments and expanded FCA rule-making powers covering interfaces, technical standards, security, operational requirements, information sharing, funding arrangements and dispute resolution.

HMT is also consulting on commercial pricing arrangements, including FCA powers to establish pricing guardrails and intervene where necessary. The proposals also cover the Future Entity and commercial Open Banking schemes.

Strengthening risk management and senior accountability

The consultation also considers how payment services regulation should accommodate emerging technologies, including agentic AI. Views are sought on whether existing authentication, consent and liability requirements remain appropriate where payments are initiated autonomously.

It also seeks views on financial inclusion, enhanced senior management accountability for financial crime risks, and whether the UK regulatory framework should reflect international developments, including EU payment reforms and the UK's continued participation in the Single Euro Payments Area (SEPA).

What do firms need to do?

The consultation is particularly relevant for firms investing in payment infrastructure, Open Banking and tokenised payment capabilities. While many of the proposals are evolutionary, they are likely to influence how future payment services are authorised, supervised and delivered. Firms developing stablecoin, tokenised deposit, programmable payment or account-to-account payment solutions should assess how the proposals could affect existing and planned payment activities, including permissions, prudential treatment, capital treatment and operating models. Where proposals could materially affect capital requirements, transition costs or product economics, firms should quantify the impact and consider providing evidence to HMT during the consultation.

The proposals also reinforce the importance of a clear commercial rationale for innovation. Firms investing in new payment capabilities should begin with a clear commercial, treasury or customer use case rather than technology adoption alone. In parallel, assess how market adoption of tokenised payments and new payment rails can create interoperability requirements, even when they do not intend to lead adoption themselves.

Many of the proposals span treasury, product, technology, legal and compliance. Bringing these functions together early will help ensure that commercial, operational and regulatory considerations are reflected in future payment decisions, particularly as more detailed requirements move from legislation into FCA rules.

Next steps

The consultation closes on 6 October 2026. Following the consultation, HMT will set out further detail on how the proposed reforms will be implemented.