UK plans payments rule overhaul to push stablecoins into mainstream finance

The UK government has launched plans to overhaul payment rules to integrate stablecoins and tokenized money into its financial system.

According to a Tuesday announcement from HM Treasury, the government will open a consultation on reforming payment services and electronic money regulations, focusing on aligning existing frameworks with digital payment technologies.

Plans outlined by the Treasury point to the creation of a single framework covering both conventional and tokenized payments, including stablecoins and tokenized deposits. 

Officials also signaled upcoming legislation that would ease administrative hurdles for firms seeking to offer stablecoin-based payment services, part of an effort to position the UK as a competitive hub for digital assets.

“We will establish a single, coherent framework for both traditional and tokenised payments, including both stablecoins and tokenised deposits,” the announcement said.

Chris Woolard, a former Financial Conduct Authority executive, has been appointed as digital markets champion under the government’s Wholesale Financial Markets Digital Strategy. 

Woolard’s role will support the adoption of tokenized assets across financial markets while encouraging coordination between regulators and industry participants.

“Collaboration and a dialogue between the private and public sectors will best support the UK’s global competitiveness as a leader in digital markets,” he said.

Stablecoins and payments reform move closer to 2027 rollout

According to HM Treasury, the latest policy package forms part of a broader effort to prepare the UK’s financial system for a full crypto regulatory regime scheduled to take effect in 2027.

Recent steps by the Financial Conduct Authority have already begun to define how different parts of the crypto sector will be regulated. 

Earlier this month, the FCA sought feedback on stablecoin issuance, trading platforms, custody services, and staking, with the regulator working to clarify how these activities will fall under the Financial Services and Markets Act.

FCA guidance has indicated that issuers of regulated stablecoins will be required to maintain 1:1 reserves and provide clear disclosures, while limiting the ability to pass yield from backing assets to retail users. 

Firms are expected to begin applying for authorization from September 30, 2026, with a transition window running until early 2027 before full rules come into force on October 25, 2027.

Until then, most crypto activity in the UK remains outside a full licensing regime, leaving the coming year as a key period for firms preparing to operate under stricter oversight.

Government explores rules for AI-driven payments

Alongside stablecoins and tokenization, UK policymakers are also examining how payment rules should apply when artificial intelligence systems execute transactions on behalf of users.

The Treasury said it will study how existing regulations need to adapt as AI-driven payment models begin to take hold, especially in cases where transactions are initiated and managed without direct human input.