Cross-authority roadmap on innovation in payments

UK regulators set out their approach to innovation in payments, money and money-like instruments. This paper explains how UK authorities’ current and proposed regulatory regimes will interact and it should be read in conjunction with the respective discussion papers from the Bank and FCA as well as PRA’s letter to bank Chief Executive Officers.
Published on 06 November 2023


Every day, households and businesses use different forms of money to make payments. As financial regulators, the Bank of England (Bank), Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) regulate systemic payment systems and other firms to ensure that payments can be made safely.

Money performs a number of functions – a unit of account, a means of payment and a store of value – and it takes various forms. There are two forms of money most commonly used in the UK. Public, or central bank, money is a liability of the central bank. It is available to the public in the form of cash. It is also available to commercial banks in the form of central bank reserves. Private money mainly takes the form of deposits in commercial banks – that is, claims on commercial banks held by the public. Other assets such as e-money may be ‘money-like’ in that they are used for payments, and these are subject to regulation to support a stable value.

Regulation and supervision by the UK authorities are designed to minimise potential for customer harm and mitigate the conduct, prudential and financial stability risks posed by the different forms of money and money-like instruments. The Bank and the PRA, in particular, aim to deliver against the principle of ‘singleness of money’. This ensures that all widely used forms of money can be used with confidence, have the same value, are generally accepted as a means of payment and are interchangeable without loss of value with all other forms of money used in the economy, including publicly issued money (cash).

As new forms of money and money-like instruments emerge, along with new types of payment systems, we need to amend the regulatory framework to ensure that risks are adequately addressed while enabling the safe and sustainable adoption of innovation in payments.

Novel technologies and developments in cryptography, tokenisation and programmability now offer the possibility of new business models and the use of new forms of digital money and payment systems. These innovations and business models open the door to major improvements in payment services and the development of new services through greater automation of payments. Reflecting the potential benefits from such innovation, the Bank is considering whether to issue a digital pound, which would be a new digital form of publicly issued money, alongside cash.

New, privately issued forms of digital money and money-like instruments, in use or in prospect, include:

  • E-money. Electronic money – or ‘e-money’ – has been available for some time as a money-like instrument to facilitate payments. Recent market developments, however, have given rise to changes in the way it is used in the UK – for example, as a means of savings – and larger-scale e-money firms are emerging to occupy an increasing share of the market, in direct competition with commercial banks.
  • Stablecoins. These are a form of digital asset that purport to maintain a stable value relative to a fiat currency by holding assets (which may be of variable value) as backing. Stablecoins may be used for a variety of purposes, including payments or investment. They are at present used primarily for transactions in cryptoasset markets. Subject to appropriate regulation, stablecoins that convincingly maintain their value may in the future be used by many people in the UK for everyday payments.footnote [1]
  • ‘Tokenised’ bank deposits. Banks are exploring issuing bank deposits in tokenised form. Tokenisation is the process of representing an asset or form of money on programmable ledgers that enable novel techniques such as atomic settlement and smart contracts.

As this innovation gathers pace, it is important that there is clarity about the regulatory frameworks that will apply to each form of money and money-like instrument, and the payment systems that transfer it. Alongside this paper, the UK authorities have published:

  • A Bank discussion paper on the proposed regime for systemic payment systems using stablecoins and related service providers.
  • An FCA discussion paper on the proposed regime for stablecoin issuers, custodians and the use of stablecoins as means of payment.
  • A PRA letter to UK bank Chief Executive Officers on banks’ innovative uses of deposits, e-money and stablecoins.

By publishing our approach jointly, this enables us to prevent regulatory arbitrage, provide certainty to firms and developers about the regime applicable to them based on the form of money or money-like instrument they want to issue, and maintain the confidence of households and businesses in their ability to make payments on a daily basis.

The regime(s) applicable to firms engaged in issuing different forms of money and money-like instruments and operating payment systems will depend on the purpose of their business, how it is conducted, and the risks it presents. Business models may range from issuing the digital money or money-like instruments with the primary purpose of generating revenue by providing payment services, to business models where revenues are generated primarily through maturity transformation. In the latter case, client funds are received and used to invest in risky assets that offer uncertain returns. E-money institutions (EMIs) are an example of the former business model and banks an example of the latter. These business models take very different types of risk, and this is reflected in the applicable regulatory regime.

1: E-money institutions

EMIs are presently regulated by the FCA for prudential and conduct purposes under a specific regulatory regime set out under the E-Money Regulations 2011 and Payment Services Regulations 2017. This will continue but, as noted in HM Treasury’s recent Call for Evidence, the current e-money regime is likely to be amended as part of the Smarter Regulatory Framework review to enhance consumer protections and strengthen firms’ resilience. This will ensure requirements keep pace with the ongoing evolution of the payments and e-money sector and appropriate prudential standards. The Financial Policy Committee at the Bank of England has also previously noted that the e-money regulatory regime would not meet its expectations if e-money were to be used as a means of payments at systemic scale.footnote [2] In the future, the Bank could regulate systemic payment systems based on e-money, if recognised by His Majesty’s Treasury (HMT). HMT and the Bank are also working on an expansion of the Bank’s systemic payments remit, which would allow the Bank to regulate any payment service providers recognised by HMT.

2: Stablecoins

There are also firms outside of the banking system and existing payment systems that may wish to offer innovative payment services and systems using new tokenised forms of digital money, such as stablecoins.

Recent legislative changes in the Financial Services and Markets Act 2023 (‘FSMA 2023’) provided HMT with the ability to amend the regulatory framework for, and UK regulators to regulate, stablecoin firms.footnote [3]

The FCA’s regime will aim to address the risks of stablecoins that claim to maintain a stable value relative to a fiat currency by holding assets denominated in that currency, when used as money-like instruments, ie for payments (and other uses) at a non-systemic scale. They will regulate, for prudential and conduct purposes, all non-systemic UK-based issuers of stablecoins.footnote [4] It will also regulate custodians of such stablecoins, including those providing custody services from the UK and those providing custody services to UK-based customers. HMT are also exploring how stablecoins issued outside the UK can be safely used in UK payments chains. They have proposed a mechanism of ‘payment arrangers’ where these payments firms assess whether such overseas stablecoins meet prescribed standards before permitting the stablecoins to be used in UK payment chains.

Non-banks may in the future issue stablecoins and operate payment systems that are used, or are expected to be used, for everyday payments at large (‘systemic’) scale. The Bank will regulate such firms that are recognised by HMT, under the regime set out in the Bank’s discussion paper being published alongside this roadmap. Payment systems and related service providers may be recognised from the point of launch if they are deemed likely to become systemic. A core part of the Bank’s proposed regime will be to ensure that stablecoins used in systemic payment systems meet equivalent standards to those expected of commercial bank deposits, in line with the principle of singleness of money.

Stablecoin holders will not benefit from the backstop arrangements that are available for bank deposits, such as deposit protection or a resolution regime. Accordingly, some elements of the Bank’s proposed regime for issuers of systemic payment stablecoins are more robust (for example, capital and backing assets requirements) than those proposed to be applicable to non-systemic stablecoins. This is necessary to ensure an overall level of protections that is equivalent to those that apply to bank deposits.

The Bank's regime for systemic payment systems using stablecoins is intended for payment system business models that do not involve the payment system or the coins taking credit, liquidity or market risk and which generate revenues from payment services rather than liquidity and maturity transformation. Firms that want to use the funds received from customers to undertake maturity transformation should seek authorisation as banks and be regulated accordingly under the PRA’s existing banking regime. Firms that provide stablecoins with claims of variable value would not be suitable for the Bank’s proposed regime.

Firms under the Bank’s remit may also fall within the FCA’s perimeter for conduct purposes as described above, as well as in the Payment System Regulator’s (PSR) remit, as described in Table A. In such cases, they will be subject to requirements imposed under the relevant Bank, FCA and PSR regimes. Further detail on how dual regulation would work for stablecoin firms is explained in Box A.

3: Tokenised bank deposits

Banks, including those that accept ‘tokenised’ deposits, will continue to be regulated by the PRA for prudential purposes and the FCA for conduct purposes. As set out in the PRA’s Dear CEO letter, banks should ensure that they only provide innovations in digital money to retail customers in the form of deposits, ie as claims on the bank that are protected by deposit insurance. The PRA’s Dear CEO letter also sets out that if a bank wants to issue e-money or stablecoins to retail customers, this should be done from a separate non-bank insolvency-remote entity, with distinct branding to the bank and adequate legal structure to ensure its failure would not adversely affect the rest of the banking group. That entity would then be regulated under the regimes for stablecoins or e-money but would also be subject to the PRA’s existing banking regulation as applied at consolidated-group level.

The different forms of privately issued money and money-like instruments are mapped against the regime that will apply to them in Table A.

Further detail about the regulators’ objectives – which in turns determines how they approach new forms of money and money-like instruments – is set out in Box B.

Table A: Forms of privately issued money and money-like instruments and applicable regulatory perimeter

Business model/economic function performed by bank or non-bank issuer

Maturity transformation

Payment services focused

Tokenised deposits



All banks

PRA for prudential (banking regime)

FCA for conduct (banking regime)

Non-systemic issuers

FCA for conduct/prudential (new regime for stablecoin issuers)

Non-systemic issuers

FCA for conduct/prudential (e-money regime, likely to be revised)

Systemic issuers

FCA for conduct (new regime for stablecoin issuers) (a)

Bank for prudential (new regime for systemic stablecoin issuers)

Systemic issuers

FCA for conduct (e-money regime, likely to be revised)

Bank for prudential (regime to be determined)

Custodians of the privately issued form of money and money-like instruments

If the custodian is a PRA-authorised bank: FCA for conduct, PRA for prudential.

If the custodian is a non-bank: FCA for conduct/prudential if non-systemic, Bank for prudential and FCA for conduct if systemic.

Payment chains

FCA to regulate the activity of providing payment services using stablecoins under the Payment Services Regulations.

Bank to regulate systemic payment systems including those using stablecoins and related service providers subject to HMT recognition.

PSR to regulate designated payment systems and service providers for competition and innovation purposes.


  • (a) If the issuer is based in the UK.

4: Next steps

The Bank’s and FCA’s regimes are exploratory at this stage. After receiving and considering feedback from the industry, the Bank and FCA expect to consult on more detailed policy proposals and enforceable rules over the course of 2024. These rules can in turn be adapted over time as the nascent industry evolves. Table B provides a high-level timeline for the next steps of the regulators’ work towards finalising our regimes for stablecoins.

Table B: Estimated timeline for regulators’ next steps on stablecoins

6 November 2023–2024 Q1

2024 H1

2024 H2


Stablecoin discussion papers and engagement with the industry

Assessment of responses and development of rules

Finalise rules for consultation

Implementation of the regimes

Box A: Dual regulation between Bank and FCA for stablecoin firms

Payment systems using stablecoins and related service providers may be recognised from the point of launch if they are deemed likely to become systemic. In this case any relevant firm that carry out the issuance or custody of stablecoins would be regulated by both the Bank and the FCA. Alternatively, a firm could start as a non-systemic stablecoin issuer (regulated by the FCA) and could later be recognised by HMT as part of a systemic payment system or related service provider (regulated by the Bank and the FCA).

The regimes proposed by the Bank and FCA would include requirements in some of the same areas, for example, setting out what the backing assets are and how they are held, redemption rules in service of stablecoin holders, and what would happen if an issuer entered insolvency. There would be differences in the detailed requirements between the FCA and the Bank’s regimes that reflect their different regulatory objectives, with the Bank’s prudential regime aiming to address the financial stability risks posed by systemic payment systems using stablecoins and related service providers and to maintain confidence in money. Customers would be able to use the stablecoins as payments in the UK irrespective of which regimes applied.

The Bank’s and the FCA’s regulatory regimes may also interact with other regimes already in place. For example, existing PRA-regulated custodians may provide custody services for systemic stablecoins. In this case, the custodian may be dual regulated by the PRA and FCA.

UK regulators will work to provide further clarity on how the transition between regimes may work in practice and how transition risks would be mitigated in due course. Further detail will also be provided on the process of co-ordination between the regulatory authorities, including the importance of information sharing, to manage a smooth glide path for firms that are transitioning into the Bank’s supervisory remit.

Box B: The UK regulators’ objectives

The Bank

Under the Bank of England Act 1998, the Bank has objectives to protect and enhance the stability of the financial system of the United Kingdom and to maintain price stability and, subject to those, to support the economic policy of HM Government, including its objectives for growth and employment. The Bank is responsible for the supervision in a manner that is consistent with its objectives of payment systems that are recognised by HMT and any service providers to recognised payment systems that are specified by HMT.


The FCA has a single strategic objective to ensure that the markets for financial services function well. Three operational objectives support this, which are: securing an appropriate degree of protection for consumers; protecting and enhancing the integrity of the UK financial system; promoting effective competition in the interests of consumers in the markets for regulated financial services. In addition, the FCA has a competition duty, which is that the FCA must, so far as is compatible with acting in a way that advances the consumer protection objective or the integrity objective, discharge its general functions in a way that promotes effective competition in the interests of consumers. Since 2023, the FCA also has a secondary objective to support the international competitiveness and growth of the UK economy in the medium to long term. The secondary objective only applies when advancing the FCA’s primary objectives and when exercising its general functions (as listed in section 1B of FSMA) eg rule-making, general guidance.

In broad terms, under the Financial Services and Markets Act 2000 (as amended) (FSMA) the FCA is responsible for: regulating standards of conduct in retail and wholesale financial markets; supervising trading and infrastructures that support those markets; the prudential supervision of authorised firms that are not PRA-regulated; and the functions of the UK listing authority and other functions under Part 6 of FSMA.

The FCA regulates payment services and the issuance of e-money and authorises or registers payment institutions, such as money remitters and non-bank credit card issuers, and EMIs. It also supervises payment institutions and EMIs in relation to their prudential and conduct requirements. The FCA supervises payment service providers, including banks and payment institutions, in relation to the conduct of business requirements under the PSRs 2017. Since January 2020, the FCA supervises cryptoasset exchanges and custody wallet providers in the UK who are required to be registered with the FCA and comply with the anti-money laundering and counter terrorist financing obligations contained in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. This requires registered firms to demonstrate they have adequate systems, controls, policies, and procedures to deal with the risks associated with money laundering and terrorist financing in the cryptoasset market. Furthermore, it also requires any officers, managers and beneficial owners of the cryptoasset business to be fit and proper. The FCA’s remit for cryptoassets has since expanded to capture financial promotions. Since 8 October 2023, firms approving or communicating cryptoasset promotions have to comply with requirements set out by the FCA policy statement 23/6 – Financial promotion rules for cryptoassets, June 2023.


The PRA is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms (PRA ‘authorised firms’).

Under FSMA, the PRA’s primary objectives are to promote the safety and soundness of PRA-authorised firms; and, specifically for insurers, to contribute to securing an appropriate degree of protection for policyholders. When discharging its general functions to advance its primary objectives, the PRA must, so far as reasonably possible, act in a way that advances its secondary objectives of facilitating: (1) effective competition in the markets for services provided by PRA-authorised firms in carrying on regulated activities (‘the competition objective’); and (2) the UK economy’s international competitiveness and growth in the medium to long term, subject to aligning with relevant international standards (‘the competitiveness and growth objective’).


The PSR is responsible for regulating HMT-designated payment systems. The PSR regulates Payment System Operators, Infrastructure Providers and Payment Service Providers in relation to those systems under three core objectives: competition, innovation, and ensuring payment systems are operated and developed to meet users’ needs. The PSR is also a competent or co-competent authority with the FCA for some of the regulations in the Payment Service Regulations 2017, and the Interchange Fee regulations. The PSR regulates HMT-designated systems that transact funds, including digital settlement assets and the PSR is able to regulate exchanges and wallets in relation to HMT-designated systems that use digital settlement assets. The PSR also has concurrent powers with the Competition and Markets Authority under the Competition and Markets Act 1998.

  1. Nevertheless, the use case for stablecoins is not bound to payments and UK regulators acknowledge that they could also be used for a broader set of purposes, including investments. The FCA’s regime for stablecoin issuers will reflect that and seeks to address the risks of stablecoins irrespective of their use case.

  2. Financial Stability in Focus: Cryptoassets and decentralised finance, March 2022.

  3. The recent legislative changes under FSMA 2023 expanded the Bank's remit to capture operators of systemic payment systems that transfer ‘digital settlement assets’ and that are recognised by HMT. The Bank will also be able to regulate service providers recognised by HMT. Service providers may include wallet providers, exchanges, and issuers (when the latter are not also the operator of the payment system). The Bank’s discussion paper focuses on stablecoins because it considers these are the most likely digital settlement assets to become widely used for payments first.

  4. For further details of the FCA’s scope, see HMT’s Update on Plans for the Regulation of Fiat-Backed Stablecoins, October 2023.