Tokenised payments and stablecoins: HM Treasury’s proposed policy

HM Treasury has opened consultation on modernising the UK’s payment services regulation. Tokenisation and stablecoins sit at the heart of this agenda, with proposals to integrate “money‑like” stablecoins and tokenised deposits into the payments perimeter, streamline permissions, and align safeguarding and custody with payment services. The consultation matters for financial services firms because it signals how HMT, the FCA and the Bank of England plan to enable tokenised payments to scale within FSMA architecture while managing financial stability and consumer risks. The consultation frames tokenised payments (including tokenised deposits and stablecoins) as a priority in delivering a modernised payments regime that supports innovation alongside strong protections.

Key themes and proposals

Same risk, same regulatory outcome for tokenised payments

HMT’s stated approach is to regulate tokenised versions of financial instruments in the same way as their traditional counterparts where appropriate, applying “same risk, same regulatory outcome”. Tokenised deposits are brought within the established legal definition of a “deposit” under financial services law, with the Government seeking views on any barriers to their use in retail payments.

Bringing stablecoins used for payments into the payments perimeter

HMT considers stablecoins capable of playing a significant role in retail and wholesale payments, but proposes robust standards given financial stability and consumer confidence risks if a coin de‑pegs. Through the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026, a new RAO activity (article 9M) covers issuance of a qualifying stablecoin in the UK; issuers will be subject to FCA rules on backing assets and may be subject to systemic oversight by the Bank of England if recognised as systemically important. Where a stablecoin is issued in the UK under article 9M RAO, the Government proposes treating it as “money‑like” for payments and bringing it within the payments perimeter.

Treatment of overseas stablecoins

HMT may extend “money‑like” treatment to certain overseas‑issued stablecoins where it formally recognises the overseas framework as delivering similar outcomes; other overseas stablecoins would fall under new cryptoasset intermediary activities (dealing as principal, dealing as agent, arranging deals) rather than the payments framework.

Avoiding dual permissions for UK‑issued stablecoin activities

To avoid firms needing two sets of permissions, HMT intends to carve out specified activities in UK‑issued qualifying stablecoins from the new cryptoasset intermediary activities, so that exchanges of UK‑issued qualifying stablecoins for money or other UK‑issued qualifying stablecoins are not treated as cryptoasset dealing; exchanges for other cryptoassets (e.g. Bitcoin) would remain cryptoasset dealing. HMT is considering whether firms authorised to issue UK‑issued qualifying stablecoins should be able to provide relevant stablecoin payment services without additional permissions, subject to conditions and supervision.

Safeguarding and custody: aligning with payments regulation

HMT is assessing the most appropriate safeguarding or custody regime for stablecoin payments, noting overlap between PSRs safeguarding and the new RAO cryptoasset safeguarding activity. The Government’s intent is that where firms safeguard UK‑issued qualifying stablecoins in the course of providing payment services, they should be regulated under the payments regime, avoiding the need for separate cryptoasset safeguarding permissions for those activities.

A single, activity‑based permissions set spanning fiat and tokenised payments

HMT proposes to replicate the PSRs Schedule 1 activities as discrete regulated activities, with some consolidation and splitting to simplify the regime (for example, combining cash‑in/cash‑out account operations; merging execution activities across credit lines; splitting “issuing payment instruments or acquiring” into separate issuing and acquiring activities). The same set of regulated activities would apply to both fiat and tokenised payments (including stablecoins and tokenised deposits) to streamline permissions for integrated business models. Given differing risk profiles, firms would need to obtain a variation of permission from the FCA to provide tokenised payment services, even where already authorised or registered for fiat services.

Programmability, smart contracts, COBs and prudential requirements

HMT highlights that tokenised arrangements enable programmability and smart contracts, potentially improving efficiency and reducing fraud and late payments; it is seeking views on whether the current conduct and prudential standards need targeted adjustments to reflect any unique or heightened risks from tokenisation.

How FM can assist

This new proposed policy from HMT represents a deregulation and creates opportunities for payment institutions and e-money institutions to offer payment services in stablecoins whilst not necessitating a Part 4A permission to provide crypto asset services. If your firm wishes to avail of these new polices and pursue new stablecoin products and services, feel free to contact an FM partner for a confidential discussion on how to structure your new stablecoin payments product.