HM Treasury on July 14 published a 12-week consultation proposing the most significant restructuring of UK payment services regulation since the Payment Services Regulations 2017 and Electronic Money Regulations 2011 were introduced. The consultation, which closes on October 6, outlines a shift from prescriptive primary legislation to an FCA-led model. Operational requirements covering authentication, safeguarding, prudential standards, and conduct rules would move from statute into the FCA Handbook, while core consumer protections and regulatory perimeter definitions remain in legislation.
Three expansions to the existing framework are proposed. UK-issued qualifying stablecoins used for payments would enter the payments regulatory perimeter and be treated as payment instruments, with overseas stablecoins from recognized jurisdictions eligible for equivalent treatment. The consultation addresses agentic AI and programmable payments, seeking views on consent scope, authorization timing, Strong Customer Authentication applicability, responsibility allocation for code failures, and revocation mechanisms for automated payment authorities. Open Banking regulation would be consolidated under FCA supervision, replacing the current split between the PSRs and the CMA Retail Banking Market Investigation Order.
The consultation complements the Financial Services and Markets Bill currently before the House of Lords, which provides the legislative mechanism to abolish the Payment Systems Regulator and transfer its functions to the FCA under Clause 13 and Schedule 2. The Bill completed its Report Stage in mid-July and awaits Third Reading before the Lords summer recess.