UK Payments and Cryptoasset Regulatory Outlook 2026: What Firms Should Expect

Executive summary

During 2025, the UK government (the Government) along with the FCA was working on transformational changes to the UK's financial environment with the stated aim to support growth, innovation and international competitiveness. Our 2026 outlook summarises the key regulatory announcements and developments that firms should anticipate for the year. Critical areas include streamlining certain regulatory regimes, the long-awaited introduction of a UK financial regulatory framework for cryptoassets, changes to contactless limits, the implementation of the Buy Now Pay Later (BNPL) regime, and further refinements to the Consumer Duty. These changes are all underpinned by the Government’s drive to make the UK as competitive as possible for financial services and support growth in emerging areas such as the digital assets and crypto sectors.

1. Streamlining of regulatory requirements

FCA and PSR consolidation

The Government consulted in October on proposals for consolidating the FCA and the PSR as part of their Regulatory Action Plan, which will see the FCA take on the PSR’s responsibilities, including promoting competition and innovation in payment systems and services and supporting the interests of consumers and businesses. The Government’s goal is to “deliver a more streamlined regulatory environment for payment systems by reducing the number of regulatory bodies, simplifying the regulatory landscape for firms and stakeholders”. 

The FCA is required to publish long-term strategies (e.g., 5-year plans) outlining how it will meet its objectives, including growth and competitiveness, which must align with the Government’s remit letters and be reviewed at least every five years.

Open banking progress

Adding to the FCA’s in-tray, last summer the National Payments Vision also named the FCA as the lead regulator to progress open banking, with the Joint Regulatory Oversight Committee (JROC) wound down. Last year, the FCA set out its expectations for the “Future Entity”, the organisation that will lead the next phase of open banking. 

As part of a drive to accelerate the adoption of open banking, HM Treasury (the Treasury) is expected to introduce legislation to give the FCA the power to set open banking rules for a Long-Term Regulatory Framework. The FCA is expected to consult on the Long-Term Regulatory framework by the end of 2026. The FCA emphasises that “Open banking can support each of our strategic priorities – supporting growth, being a smarter regulator, helping consumers navigate their financial lives, and fighting financial crime”.  

Commercial variable recurring payments (cVRPs)

The FCA and PSR have been working jointly towards the launch of commercial variable recurring payments (cVRPs) through the UK Payments Initiative (UKPI), which comprises 31 firms from across the ecosystem developing a first phase commercial model.

The first live payments under the UKPI scheme are expected to take place in the first quarter of 2026. This is an exciting time as the momentum is expected to drive forward payments in e-commerce and new use cases, which could expedite the progress of open banking[1]. For example, merchants and their payment service providers are looking at open banking rails to support subscription payments, in addition to, or as an alternative to direct debit payments on BACS. 

On 20 January 2026 the FCA and PSR announced that they will not carry out competition investigations into the cVRP Pricing Arrangements for Phase 1. This would allow UKPI to centrally set and mandate a price that an Account Servicing Payment Service Provider (ASPSP) would charge a Payment Intitation Service Provider (PISP) to initiate cVRPs for one of its customer accounts (access fee). 

The relaxed stance to competition investigations would last for the period of time ahead of implementation of the legislative framework under Data (Use and Access) Act 2025 (DUAA) or other relevant legislative mechanism or until July 2027.

Reforms to Senior Managers & Certification Regime (SM&CR)

The FCA is currently reviewing SM&CR rules (consultation paper 25/21)[2] to reduce the overall regulatory burden on firms.  This could include eliminating the Statutory Certification Regime under the Financial Services and Markets Act 2000 (FSMA) to allow the FCA and PRA to create a more flexible, proportionate regime through their own rulemaking powers.

The proposals would also alleviate some of the administrative burden, such as removing the requirement for annual re-certification of staff, reducing the number of roles requiring pre-approval, and allowing firms to self-certify certain senior manager appointments and notify regulators afterward, Regulators would still retain oversight and enforcement powers.

The reforms aim to support a 50% reduction in SM&CR-related regulatory burden.

SM&CR application to cryptoasset firms

As the SM&CR Review and the Treasury's legislative proposals are still in progress, the FCA is proposing to apply the current SM&CR to cryptoasset firms for now. The FCA intends to apply all existing SM&CR elements and rules to cryptoasset firms in the same way they currently apply to other authorised firms. This means that once the new rules come into force, senior managers at cryptoasset firms will be personally accountable for operational failures and misconduct, significantly raising the regulatory and accountability stakes for the sector.

In January 2026, the FCA announced CP26/4 which sets out a proposed criteria for when stablecoin issuers and cryptoasset custodians should be classified as SM&CR ‘Enhanced’ firms. The consultation sets out two proposed thresholds for stablecoins issuance firms and cryptoasset custodian firms:

• Stablecoin issuance firms: will be classified as Enhanced if the total value of backing assets exceeds £65bn, calculated as a three-year rolling average.
• Cryptoasset custodian firms: can be classified as Enhanced if the combined value of the cryptoassets held on trust and safe custody assets in the firms last calendar year exceeds £100bn. 

Firms should review CP 25/25 and CP26/4, as final decisions will be reflected in future FCA policy updates. As some rules will be rescinded, the FCA will also likely introduce a ‘modification by consent’ approach, which means the FCA will be able to temporarily waive the Handbook requirements that are expected to be rescinded.

The FCA will review feedback to their consultation paper and provide feedback via a Policy Statement in mid-2026.

2. Update on implementing a UK framework for cryptoassets

Overview: expanding the regulatory perimeter

The UK's existing regulatory perimeter covers cryptoasset promotion and requires firms providing cryptoasset services from a UK place of business to comply with anti-money laundering (AML) requirements. A patchwork of AML requirements (introduced in 2020) and financial promotion restrictions (implemented in October 2023) has pushed a lot of crypto businesses offshore. However, the Government is now proposing to expand the UK financial services framework to include certain crypto-asset activities, including in relation to stablecoins. The aim is to create greater legal certainty for firms to set up and operate crypto businesses in the UK whilst providing protection to consumers to ensure they can make informed decisions relating to crypto products they use or invest in.

FCA Handbook application to new cryptoasset activities

Certain cryptoasset activities will fall under the FCA’s remit including dealing, arranging, advising and managing “qualifying crypto-assets”, issuing “qualifying stablecoins” (which will also fall within the definition of “qualifying crypto-assets”), safeguarding qualifying cryptoassets and specified investment cryptoassets, operating a qualifying cryptoasset trading platform (CATP), intermediation and staking.

Key consultations

The FCA at the end of 2025 published a flurry of consultation papers focused on advancing the regulation of cryptoassets to meet the 2026 final rules.

•  CP 25/40 setting out proposed rules and guidance for firms carrying out cryptoasset activity.

• CP 25/41 setting out proposed rules on admissions, disclosures and the market abuse regime for cryptoassets.

• CP 25/42 setting out a proposed prudential regime for cryptoasset firms.

The FCA have also set out proposals on how the Consumer Duty, conduct standards, redress and safeguarding will apply to cryptoasset firms, including a proposed approach to international firms in CP26/4. 

The consultation closes on 12 March 2026.

CP 25/40: rules and guidance for cryptoasset firms

CP 25/40, sets out that the FCA proposes to assess cryptoasset firms’ legal form on a case-by-case basis, both at the FCA authorisation gateway and throughout supervision. The FCA intends to consult further in Q1 2026, which will set out considerations in regard to effective supervision suitability, settlement related rules, the Consumer Duty, safeguarding rules, systems and controls requirements and business models, as well as its approach to international firms, such as location and the role of the FCA as a branch’s host state regulator. The consultation closes on 12 February 2026.

Applying FCA handbook rules to cryptoasset activities

The FCA is proposing that cryptoasset firms should be subject to FCA Handbook Rules and Guidance, including those on Financial Crime, and is proposing to expand the Handbook glossary definition of “designated investment business” (DIB) to capture qualifying cryptoasset activities. 

This is because the FCA believes that the proposed cryptoasset activities are similar or equivalent to traditional finance activities that currently fall under the DIB definition. This means that qualifying cryptoasset activities/DIB services will be required to adhere to COND, PRIN, GEN, SUP, client money rules in CASS 7 in some instances, as well as various COBS and consumer protections in the SYSC rules such as the operational resilience framework (SYSC 15A). 

Fiat-backed stablecoins: policy pivot

The proposals on fiat-backed stablecoins have attracted some criticism. There has been a policy pivot under the Labour government. Whilst the Conservative government planned to treat payment-stablecoins as e-money, stablecoins will now be regulated under traditional financial services regime alongside other cryptoassets. However, stablecoin issuers will be required to hold or back the funds they receive in liquid assets. For systemically important stablecoins, the Bank of England is proposing enhanced requirements that mandate holding more cash at a bank rather than investing in treasuries or longer-term funds. 

Concerns

The UK must avoid imposing regulatory constraints that could deter investment in the crypto sector, especially given the evolving nature of these products and the uncertainty around their future development.

There is also uncertainty over how payment firms should deal with their activities in relation to fiat-backed stablecoins. Based on the latest consultations, any on-ramping or off-ramping of stablecoins could be viewed as a form of dealing and payment firms would therefore be required to apply for authorisation under FSMA. Again, this could be seen as a handbrake against firms expanding into the crypto space, and the UK could be viewed as uncompetitive against other markets if these plans remain unchanged.

FCA’s risk-based approach

The FCA claims it is taking into account the novelty of the cryptoasset market and cannot eliminate all risks, but wants to ensure that customers are making informed decisions, are aware of the risks involved and that they might lose all of their money, and of the significant volatility of the value of cryptoassets. Customers should also be adequately protected, in that firms need to be well capitalised to absorb financial shocks and be financially resilient. 

The FCA also wants to ensure firms are adequately managing the risks of fraud, money laundering and terrorist financing. The FCA has also released a consultation on market abuse to ensure that UK investors and market participants are participating in fair, transparent, orderly and resilient markets.

Extra-territorial application

Something that we believe has gone slightly under the radar is that the crypto regulatory framework will have extra-territorial effect, so even if a firm is completely offshore, if it has customers in the UK, it will need to obtain an authorisation in the UK. 

The existing regulatory perimeter for current financial services is more nuanced and this step by the Government is the first explicit application of an extra-territorial financial regulatory framework. So, for example, US and offshore crypto firms will need to think carefully about whether to continue servicing UK customers and will need to obtain an authorisation in the UK in order to retain a UK customer base. This authorisation process will require mind and management to be in the UK, so there will need to be significant resources dedicated to the UK.

Timeline and next steps

The FCA will publish final rules after considering all feedback received in their Policy Statement at some point in 2026 as per the Crypto Roadmap. The authorisations gateway for firms to apply for authorisation is expected to open in September 2026, with the new regime coming into force in October 2027.

Bank of England systemic stablecoins regime

Alongside work the FCA is undertaking around stablecoins, the Bank of England (BoE) has also proposed[3] a regulatory regime for sterling-denominated systemic stablecoins, focused on possible future use in real world payments and settlements, not their current use to buy and sell cryptoassets. With use of regulated stablecoins potentially leading to faster, cheaper retail and wholesale payments, stablecoin use could potentially pick up momentum with certain providers becoming essential in the ecosystem. The BoE's approach would help future-proof stablecoin regulation by establishing transitional arrangements for stablecoins that achieve systemic importance.

Banking asset requirements

The proposed approach under the BoE would require at least 40% of backing assets to be held as deposits at the Bank, which could be used to meet redemption in normal and stress conditions, with up to 60% of backing assets to be held in short-term sterling-denominated UK government debt securities.

No interest payments

In line with the principle that systemic stablecoins should primarily be used for payments and not as a means of investment, the Bank proposes that systemic stablecoin issuers should not pay interest to coin holders, which would align the treatment of systemic stablecoins with e-money and a digital pound. This has been something the BoE has been considering and although not in plans yet, the BoE has said that it could consider rewards linked to transaction volumes for systemic stablecoin use instead.

UK subsidiary requirement

Other considerations from the Bank would require UK based sterling-denominated systemic stablecoin issuers, irrespective of their location, to establish a subsidiary in the UK to carry out business and issuance activities in the UK and with UK-based consumers, with that subsidiary holding their backing assets and assets funded by capital in the UK.

Joint FCA/BoE framework

In 2026 the Bank intends to publish and consult, jointly with the FCA, the detailed design of the joint regulatory framework, with a key focus on providing clarity on how respective authorities' remits will apply in practice and the transition between the two regimes. The Bank's final rules and its supervisory approach are expected in H2 2026.

The consultation is still open and closes on 10 February 2026.

Distributed ledger technology (DLT) and digital assets

In 2026, the BoE plans to launch a synchronisation lab[4] to enable testing of real-world use cases for DLT and Digital assets, allowing the Real Time Gross Settlement system (RTGS) to interoperate with external ledgers including those based on DLT.

The Government is also undertaking the Digital Gilt Instrument (DIGIT) pilot which will include the issuance and settlement of debt on a DLT platform through the Digital Securities Sandbox.

The BoE is engaging with banks to understand whether regulatory response is needed to facilitate tokenised commercial bank deposits.

3. Contactless Limits

In December 2025, the FCA implemented earlier proposals aimed at making payments more convenient for consumers. The work was part of a package of measures sent to the Prime Minister last January to support economic growth.

In summary the amendments remove the existing regulatory limits: £100 on a single contactless transaction, £300 on cumulative transactions or five consecutive contactless transactions, in favour of a new risk-based exemption, introduced to give greater flexibility to banks and other payment service providers when determining their approach to contactless payments. 

Risk-based exemption

Under the new exemption, PSPs can only process transactions which have been identified to be low risk. Allowing the PSP to determine how and when a contactless payment is made, could in theory allow the PSP to develop innovative fraud detection and prevention products. Customers can also set personal contactless limits, including the ability to switch off the contactless functionality.

Fraud considerations

UK Finance's Annual Fraud Report 2025 estimates that contactless fraud rates are currently low at circa 1.3p per £100 spent on contactless transactions, compared to 6p per £100 for all unauthorised fraud. In response to concerns regarding increased fraud, the FCA has undertaken analysis indicating there is a low risk of increased fraud associated with the proposed changes, noting that PSPs have strong incentives to maintain low levels of fraud, especially given they are liable for reimbursement for unauthorised payments.

The FCA consulted[5] on the risk-based approach in September last year. The FCA also recognises that the change will not necessarily have immediate effect for most consumers, based on industry feedback the FCA anticipates that most banks and payment service providers will opt to maintain the existing limits for the foreseeable future. 

We believe that any potential increase in thefts could cause greater chargebacks to merchants who will ultimately bear the costs, with PSPs making good on fraudulent payments. However, the FCA says it will monitor the new exemption as part of its regular supervisory and fraud reporting activities.

The new approach comes into force on 19 March 2026. 

4. Buy Now Pay Later (BNPL)

On 14 July 2025, the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 was laid, which provides legislation for BNPL[6] agreements (interest-free credit which finances the purchase of goods or services and is repayable in 12 or fewer instalments within 12 months or less), bringing BNPL agreements under the remit of the FCA. 

The legislation also creates a temporary permissions regime (TPR) to allow firms to continue operating while the FCA considers their application for necessary permissions. A consultation was introduced on this over the summer of 2025 and has now closed. BNPL providers will either need to be authorised for the relevant consumer credit services they offer or have temporary permission by 15 July 2026. If not, BNPL lenders will be required to stop providing new arrangements. However, firms who don’t receive authorisation will be able to continue serving agreements entered into before 15 July 2026. 

Timeframes are quite tight; the FCA expects to publish a policy statement in Q1 2026, which would give firms less than 6 months to ensure they can comply with new BNPL rules, and inform the FCA that they wish to enter the TPR prior to Regulation Day. For firms to enter the TPR they will need to operate a regulated activity, and at the initial commencement date of the Government’s legislation, notify the FCA before Regulation Day and pay the relevant registration fee (which will be consulted on between now and Regulation Day).

5. Review of the Consumer Duty regime

2025/26 Priorities

In September last year, the FCA set out priorities for the Consumer Duty for 2025/26[7]. The Consumer Duty is part of the FCA’s wider regulatory framework and covers key aspects of the firm-customer relationship and requires all firms (including PSPs) to act to deliver good outcomes for retail customers. The Consumer Duty remains a priority which is evident from the number of appearances it makes throughout the Regulatory Initiatives Grid. The FCA has set out 4 cross-cutting projects[8], which are focused on reviewing how firms are actually delivering outcomes:

• Review of products and services outcome - How firms are designing products and services to meet customer needs, including those with characteristics of vulnerability.
• Review of firms' approaches to outcomes monitoring - How firms are responding to outcomes monitoring requirements.
• Review of firms' customer journey design - Looking at the design and delivery of firms' customer journeys to ensure customers' needs are met, with a particular focus on how firms apply friction throughout the journey.
• Review of the consumer understanding outcome - How firms' communications are helping consumers make informed decisions.

CASS amendments

The FCA in December published Consultation Paper 25/37[9] on Targeted Clarifications of Handbook Materials, which forms part of the FCA’s Consumer Duty Requirements. CASS short-term improvements are included in some of the items covered, with a view to updating of current rules and guidance. The amendments include amendments to CASS 6 and 7 as follows: 

• Amending record-keeping requirements for certain due diligence relationships (CASS 6 and 7).
• Broadening reconciliation rules to allow the use of records that were not envisaged when the rules were introduced (CASS 6).
• Broadening reconciliation rules to recognise scenarios where an external statement may be received less frequently, for example when a fund manager in the normal course of business will only provide a statement on a quarterly basis (CASS 6).
• Where firms receive or hold client money or assets for retail clients, clarifying how the Duty applies to certain CASS rules (CASS 6 and 7).
• Adding flexibility within the rules for the treatment of money held in client bank accounts relating to bank interest earned on client money (CASS 7).

These changes will have an effect on cryptoasset providers and shape how they manage client money. The consultation closes 27 January 2026.

Rules for advertising consumer credit

In its March 2025 feedback statement on post–Consumer Duty requirements[10], the FCA committed to reviewing its consumer credit advertising rules. This work will focus on the financial promotions regime, particularly CONC 3.5, to reduce prescriptive requirements and adopt a more outcomes-focused approach aligned with the Consumer Understanding outcome of the Consumer Duty. This is expected to take place in Q2 2026.

How will these changes to consumer duty impact cryptoasset activities?

In terms of retail customer focused requirements, and in Consultation Paper 25/40[11], which sets out guidance for firms carrying out cryptoasset activity, the FCA said it would consult on the approach to the Consumer Duty for cryptoasset firms in a later consultation paper. However, subject to the discussion in CP 25/40 on the Application of the FCA Handbook for Regulated Activities, the FCA still expects cryptoasset trading platforms (and operators) to ensure retail users are informed in a timely and appropriate manner of the terms and nature of the service being provided to them. 

The Consumer Duty and general conduct requirements are expected to be consulted on in H1 2026. 

Conclusion

2026 is another year full of regulatory change with some big milestones expected, including advances in BNPL regulation, Open Banking and finally the introduction of the UK crypto-asset authorisation regime. Firms will need to ensure they are able to monitor and manage these regulatory developments and also understand where opportunities exist to develop new products and expand their businesses whilst complying with the evolving regulatory environment.

Key Dates and Milestones for 2026

January 2026

• Consultation on targeted clarifications of Handbook materials (including CASS amendments) closes on 27 January 2026

February 2026

• Bank of England consultation on sterling-denominated systemic stablecoins closes on 10 February 2026
• FCA consultation papers CP 25/40, 41 and 42 on cryptoasset regulation close on 12 February 2026
• PSR consultation on card scheme and processing fees remedies closes on 13 February 2026

March 2026

• New contactless limits approach comes into force on 19 March 2026
• PSR plans to consult on a Regulatory financial reporting remedy by 31 March 2026
• FCA consultation paper 26/4 closes on 12 March 2026

Q1 2026 (January-March)

• FCA expected to publish a policy statement on Buy Now Pay Later (BNPL) regulation in Q1 2026
• FCA intends to consult further in Q1 2026 on cryptoasset firm considerations including supervision suitability, settlement rules, consumer duty, safeguarding rules, systems and controls, and approach to international firms
• First live payments under the UK Payments Initiative (UKPI) scheme for commercial variable recurring payments (cVRPs) are expected to take place in the first quarter of 2026

Q2 2026 (April-June)

• FCA review of consumer credit advertising rules expected to take place in Q2 2026, focusing on financial promotions regime to reduce prescriptive requirements and adopt a more outcomes-focused approach
• PSR final decision on card scheme and processing fees remedies expected to take place between May-June 2026

Mid-2026

• FCA will review feedback on SM&CR consultation and provide feedback via a Policy Statement in mid-2026

July 2026

• BNPL providers will need to be authorised for the relevant consumer credit services they offer or have temporary permission by 15 July 2026 (Regulation Day), otherwise they will be required to stop providing new arrangements

H2 2026

• Bank of England's final rules on systemic stablecoins and its supervisory approach are expected in H2 2026

September 2026

• Authorisations gateway for cryptoasset firms expected to open in September 2026.

General 2026

• FCA will publish final rules on cryptoasset regulation after considering feedback, in their Policy Statement at some point in 2026 as per the Crypto Roadmap
• Bank of England intends to publish and consult, jointly with the FCA, on the detailed design of the joint regulatory framework for systemic stablecoins in 2026, with key focus on providing clarity on how respective authorities' remits will apply in practice and the transition between the two regimes
• Bank of England plans to launch a synchronisation lab in 2026 to enable testing of real-world use cases for DLT and Digital assets, allowing the Real Time Gross Settlement system (RTGS) to interoperate with external ledgers including those based on DLT

End of 2026

• The Treasury is expected to introduce legislation to give the FCA the power to set open banking rules for a Long-Term Regulatory Framework, with the FCA expected to consult on the Long-Term Regulatory framework by the end of 2026

2027

• New cryptoasset regime expected to come into force in October 2027