The proposal would replace the current patchwork of overlapping rules, including the Payment Services Regulations, the E-Money Regulations, and emerging digital asset legislation, with one consolidated regime overseen by the Financial Conduct Authority. Treasury officials confirmed the plan during the event, saying the goal is to allow the UK to "facilitate both traditional payments and tokenized payments in a coherent and comprehensive way." A public consultation is scheduled to close by end of June 2026, with FCA rulemaking expected to run through 2027 and 2028.

A Policy That Keeps Changing Direction

The reversal is notable because Labour's own Treasury minister, Tulip Siddiq, explicitly ruled out bringing stablecoins inside the payments perimeter in November 2024, citing concerns about a disproportionate regulatory burden. That position itself had scrapped a plan first introduced by the Conservative government in 2022. The current administration is now reinstating the original approach, a sign that stablecoins have grown too embedded in payment infrastructure to leave outside the regulatory perimeter.

The shift also carries urgency from a competitive standpoint. The EU's Markets in Crypto-Assets (MiCA) framework has been live since mid-2024 and caps non-euro stablecoin usage within Europe, creating a regulatory divergence the UK framework will need to address directly. The announcement forms part of the broader Leeds Reforms agenda, the government's programme of financial services liberalisation intended to reinforce the UK's position as a global financial centre.

Economic Secretary Lucy Rigby framed the shift in competitive terms. "Fintech is a true British success story, and we are backing the industry to maintain its competitive edge," she said at the event. The UK hosts more than 3,000 fintech firms and attracted £2.6 billion in investment in 2025, ranking second globally behind the United States.

What Tokenized Deposits Mean in Practice

The framework introduces formal recognition for tokenized deposits, which are blockchain-based representations of ordinary bank deposits. Unlike stablecoins issued by non-bank entities, tokenized deposits sit on bank balance sheets, bear interest, and carry existing protections under the Financial Services Compensation Scheme (FSCS), the UK's deposit guarantee programme. That distinction matters for consumers: FSCS coverage protects deposits up to £85,000 per person per institution, a protection that does not extend to most stablecoins currently in circulation.

On the stablecoin side, the framework maintains a two-tier structure. Issuers that do not pose systemic risk will answer to the FCA alone. Those that Treasury designates as systemic will face joint oversight from the FCA and the Bank of England, with the central bank responsible for prudential supervision and financial stability risk. The legislative foundation for this regime is the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026, enacted by Parliament on 4 February 2026, which formally brings cryptoassets within FCA remit. The broader crypto authorisation gateway opens in September 2026, with firms required to submit applications by February 2027 and the full regime going live in October 2027.

The Payments Systems Regulator, a separate body that currently oversees payment infrastructure, is being absorbed into the FCA as part of the consolidation.

On-Chain Context

The global stablecoin market now sits at approximately $300 billion in total value, with around 98 percent of that denominated in US dollars. Euro-pegged stablecoins account for just 0.2 percent of the market, roughly $620 million. Despite the scale, between 88 and 90 percent of on-chain stablecoin activity is tied to crypto trading rather than everyday payments. Cross-border transfers and retail use each account for around 2 percent of activity, according to data from Deutsche Bank and The Payments Association.

That gap between headline market size and real-world payment utility is part of what the UK framework aims to address.

Regional Stakes: South Asia and Sub-Saharan Africa

The policy has direct implications for remittance corridors that run through the UK. The country is one of the largest sources of remittances to India, Pakistan, and Bangladesh. India now ranks first in the 2026 Global Crypto Adoption Index, while Pakistan ranks eighth, with an estimated 1.6 million Pakistanis living in the UK.

Regulatory ambiguity has deterred UK-licensed fintechs from building stablecoin-based remittance products for these corridors. A unified framework with clear legal standing for stablecoins could change that calculus, lowering costs on routes where transfer fees remain elevated. India's ongoing international expansion of its Unified Payments Interface (UPI) also creates the possibility of structured GBP-INR stablecoin corridors, a development that UK-licensed fintechs may be well positioned to pursue once a clear regulatory path exists.

In Sub-Saharan Africa, on-chain transaction volume reached $205 billion in the year to June 2025, up 52 percent year on year, according to Ripple. Stablecoin usage in the region grew 180 percent over a comparable period, according to Crypto News Navigator, though independent confirmation that both figures cover an identical 12-month window is pending. Nigeria ranks second globally in crypto adoption, and its Investments and Securities Act 2025 formally recognises digital assets as securities. A regulated sterling-denominated stablecoin emerging from the UK framework could give African fintechs, including firms such as Yellow Card, Chipper Cash, and Bitnob, a GBP-pegged digital asset to work with alongside the dominant dollar-pegged instruments. Kenya is also a relevant jurisdiction: its Digital Asset legislation, enacted in October 2025, establishes a co-oversight model that researchers suggest may be influenced by the UK's emerging approach to tokenized deposits. Researchers at the Centre for Global Development have cautioned that widespread adoption of dollar-denominated stablecoins in lower-income countries can erode local monetary policy by encouraging currency substitution; a UK sterling stablecoin, however, would present a comparatively less destabilising alternative for economies with GBP-linked ties, which is a meaningful distinction in the context of the UK's sterling-focused push.

What Comes Next

The government also announced additional items at Fintech Week: £1 million in additional funding for the Centre for Finance, Innovation and Technology (CFIT), the appointment of Chris Woolard CBE as Wholesale Digital Markets Champion, and an acknowledgement that AI-executed payments (transactions completed by software agents without real-time human sign-off) will require dedicated rules. Those rules have not yet been formally proposed, but the forthcoming consultation will actively seek input on how to regulate agentic payments, signalling that the question is already within the policy pipeline.

FCA Chief Executive Nikhil Rathi said the agency's growth agenda extends beyond institutions. "Supporting growth helps consumers, improving their financial resilience and providing more choice," he said.

Firms looking to operate under the new regime have until the September 2026 gateway opening to prepare their authorisation applications.