Fintech, digital assets, payments and consumer credit | UK Regulatory Outlook January 2026

Fintech

Fintech FCA approach to AI regulation remains principles-based

In September 2025, the Financial Conduct Authority (FCA) confirmed that its regulatory approach to firms' use of AI would remain principles-based and outcomes-focused, with no plans to introduce new rules. The FCA continues to rely on existing regulatory frameworks – including the Consumer Duty and Senior Managers and Certification Regime (SMCR) – to regulate AI use in financial services.

The FCA is focusing its AI work on ways to allow firms to safely adopt AI, experimenting and developing via initiatives such as AI Live Testing, its Supercharged Sandbox and AI Sprints. Applications for the first cohort of the supercharged sandbox are now closed – with accepted firms now able to test early-stage proofs of concept.

Artificial Intelligence (Regulation) Bill reintroduced to Parliament

The Artificial Intelligence (Regulation) Bill was reintroduced to Parliament in March 2025 as a private members' bill. It proposes creating a dedicated AI supervisory authority, mandating AI officers in companies, and requiring independent audits. As a private members' bill, it is not backed by the government and is unlikely to become law – although it has sparked debate and may well influence government-backed legislation.

Digital Assets

Cryptoassets regulation moves closer

Three further consultation papers were published by the FCA in December, in another significant step towards the regulation of cryptoassets:

• CP25/40: Regulating cryptoasset activities – a consultation on proposed rules and guidance for firms conducting regulated cryptoasset activities such as trading platforms, intermediaries (including cryptoasset lending and borrowing), staking and decentralised finance;
• CP25/41: Admissions & disclosures and market abuse regime for cryptoassets; and
• CP 25/42: A prudential regime for cryptoasset firms.

CP25/40 includes proposals relating to: cryptoasset trading platform (CATP) operation; cryptoasset intermediaries; lending and borrowing; staking; decentralised finance (DeFI).

All consultations remain open until 12 February 2026, after which final rules in relation to each consultation will be set out via policy statements published later in the year.

Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025

As promised, on 15 December, HM Treasury laid the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025. Establishing new regulated activities for cryptoassets (such as operating a cryptoasset trading platform and issuing stablecoins), the regulations also set out, among other things:

• the majority of the provisions will come into effect on 25 October 2027, bar some that will commence early to allow the FCA to make rules and give guidance;
• two designated activity regimes: (i) for public offers of qualifying cryptoassets and admissions to trading on qualifying cryptoasset trading platforms and (ii) covering market abuse (including insider dealing, the disclosure of inside information and market manipulation);
• Regulated Activities Order amendments: new regulated activities include the issuing of qualifying stablecoin, the safeguarding of certain cryptoassets, operating cryptoasset trading platforms, dealing in cryptoassets as principal or agent, arranging deals in cryptoassets, and cryptoasset staking. Carrying on these activities will require authorisation, subject to relevant exclusions;
• Financial Promotions Order amendments: specifying certain activities relating to cryptoassets as controlled activities and updating the controlled investment of “qualifying cryptoassets”.

BoE publishes consultation on regulating systemic stablecoins

In November 2025, the BoE published a consultation paper on regulating sterling-denominated systemic stablecoins for UK payments issued by non-banks, setting out proposals on their use as a settlement asset in wholesale financial markets, and its approach to non-sterling denominated stablecoins that could become systemic in the UK. The consultation closes on 10 February 2026.

Stablecoins used as assets for non-systemic purposes, such as the buying and selling of cryptoassets, would be regulated by the FCA.

FCA launches Regulatory Sandbox cohort for stablecoin issuers

At the end of November 2025, the FCA announced the launch of a special cohort within its Regulatory Sandbox for firms issuing stablecoins, with applications due by mid-January 2026. The FCA also plans to host stablecoin policy sprints in March 2026, with expressions of interest opening in January 2026.

Reporting Cryptoasset Service Providers Regulations come into effect

On 24 June 2025, the Reporting Cryptoasset Service Providers (Due Diligence and Reporting Requirements) Regulations 2025 (SI 2025/744) were made and will come into effect on 1 January 2026. The draft regulations incorporate CARF rules and outline due diligence, record-keeping, and reporting obligations for UK RCASPs. The CARF will apply from 1 January 2026, with the first reports due by 31 May 2027.

Property (Digital Assets etc) Act 2025 receives royal assent

On 3 December 2025, the Property (Digital Assets etc) Bill received royal assent and came into effect. For the first time in British history, digital holdings including cryptocurrency, non-fungible tokens such as digital art, and carbon credits can be considered as personal property under the law.

HM Treasury confirms FCA to publish Open Finance roadmap by March 2026

HM Treasury's Financial Services Growth and Competitiveness Strategy confirms that the FCA will set out an Open Finance roadmap by March 2026, to align with the National Payments Vision. It is expected to sequence priority datasets and use cases (such as SME lending and mortgages), set technical and trust‑framework expectations, and signpost the secondary legislation required to establish sectoral schemes. The work sits alongside plans for the planned "future entity" to steward open banking standards with potential to scale into Open Finance, and the government's broader Smart Data programme to deliver interoperable schemes across the economy.

Payments

FCA safeguarding regime

In August 2025, the FCA published its policy statement on changes to the safeguarding regime for payments and e-money firms (PS25/12). The supplementary regime will come into effect on 7 May 2026, reflecting an increase in the proposed implementation period from six to nine months.

Key modifications include: a £100,000 threshold below which payment firms will not require an annual external safeguarding audit; simplified internal reconciliation rules; and an amended monthly safeguarding return. Firms within scope should review the policy statement to assess the likely impact on their business.

Tackling authorised push payment fraud

The Payment Systems Regulator (PSR)'s mandatory APP fraud reimbursement requirements for FPS and CHAPS payments came into effect in October 2024. Marking the first 12 months in October 2025, the PSR's quarterly dashboard reported approximately £112 million reimbursed, with 97% of claims resolved within 35 days and a 15% fall in claim volumes versus the prior-year period. UK Finance reported that 66% of APP fraud cases started online and 17% via telecommunications networks. An independent evaluation of the reimbursement policy is expected in spring 2026, at which point the PSR will consider whether any aspects of the policy should be amended.

Open banking and variable recurring payments

In August 2025, the FCA published feedback statement FS25/4 confirming that a new entity will replace JROC as the primary standard-setting body for Open Banking APIs in the UK. The FCA confirmed in October 2025 that it would continue to engage with stakeholders and government to shape and publish an Open Finance roadmap by March 2026. Commercial VRPs (cVRPs) are progressing, with 31 organisations announcing joint funding efforts under a multilateral agreement to create an independent operator. 2026 is likely to be a key year in terms of laying the foundations for broad adoption of VRPs and cVRPs in the UK.

Interchange and card scheme fees market reviews

In October 2025, the PSR published a consultation on methodology for developing a price cap on multilateral interchange fees for UK-EEA card-not-present outbound transactions, proposing the merchant indifference test as a starting point. The consultation closed on 21 November 2025. Separately, in April 2025, the PSR consulted on proposals requiring greater information transparency from card scheme operators, regulatory financial reporting, and obligations on schemes to pay due regard to principles on system outcomes. A final decision on implementing a price cap is expected at some stage in 2026.

National Payments Vision and PSR consolidation

Launched in November 2024, the National Payments Vision seeks to build a world-leading payments ecosystem. In November 2025, the Payments Vision Delivery Committee published its strategy for retail payments infrastructure, setting a public-private governance model around five outcomes: greater user choice and innovation; seamless interoperability across a multi-money ecosystem; stronger fraud protection; fair access for participants; and high operational and financial resilience. HM Treasury is consulting on consolidating the PSR's functions within the FCA, with the consultation having closed on 20 October 2025 and further information expected in 2026. The BoE published a progress update on the potential digital pound in October 2025, with the blueprint expected in 2026.

UK review of PSRs vs PSD3

In June 2023, the European Commission proposed PSD3 and a new Payment Services Regulation to modernise EU payment services by enhancing consumer protection and competition. The package would consolidate and replace PSD2 and EMD2, strengthen fraud prevention through enhanced monitoring and data sharing, improve Open Banking, and ensure non-bank payment service providers can access all EU payment systems and hold bank accounts. Through 2024 and 2025, the European Commission, European Parliament and the Council of the EU have proposed amendments to the legislative proposal and are aiming to reach political agreement. PSD3 is expected to take effect around 2027 or early 2028.

The proposals will affect firms operating in the EEA, but there are no current plans to mirror PSD3 changes in the UK. In January 2023, HM Treasury launched a review and call for evidence on the UK Payment Services Regulations, highlighting shortcomings and seeking views on improvements for firms and consumers. The call for evidence closed in April 2023, and HM Treasury's response is still awaited, potentially pending clarity on the EU's PSD3 and the new Payment Services Regulation. Given the UK PSRs and EMRs are based on PSD2 and EMD2 and support UK equivalence for SEPA access, the UK may wish to assess the final EU framework before proceeding with any domestic reforms. Firms operating in the EU will need to continue to track the draft legislation, while firms operating in the UK should keep track of any changes to UK requirements and be aware of any discrepancies between the two regimes.

Consumer credit

Consumer Credit Act reform

On 19 May 2025, HM Treasury published its Phase 1 consultation on reforming the consumer credit regime, outlining the government's overall vision and its approach to information requirements, sanctions and criminal offences. Central proposals include repeal of prescriptive information requirements and associated unenforceability sanctions, and consideration of removing CCA criminal offences. Phase 2 is expected to address more sensitive matters including business lending scope and section 75 purchase protection. Firms should look out for further consultations and announcements from HM Treasury on next steps, with implementation not expected until 2026 at the earliest.

Regulation of buy-now pay-later products

The FCA published its consultation on draft rules for deferred payment credit (DPC) in July 2025, following HM Treasury's consultation on the legislative framework. New FCA rules will mandate provision of key product information at pre-contract stage, require provision of a copy of the DPC agreement once made, and require notification of missed payments. The temporary permissions regime (TPR) will start on 15 July 2026 (Regulation Day), with firms required to apply for authorisation by January 2027. Firms should review the FCA's draft proposals and begin preparing for the arrival of TPR and Regulation Day.

Broker commissions judgment – Johnson, Wrench and Hopcraft

The beginning of August 2025 saw the Supreme Court hand down its much-anticipated decision in the Johnson, Wrench and Hopcraft motor finance commission case, establishing when a motor dealer owes a fiduciary duty to a consumer.

Although motor dealers are capable of influencing a borrower's decision on finance, the court decided that is not enough for a fiduciary duty to exist – that would require a single-minded duty of loyalty preventing the fiduciary from having a personal interest in the transaction. Throughout the transaction, including the arranging of finance, motor dealers have their own commercial interest in getting the purchase of the vehicle concluded.

As a motor dealer does not owe a customer a fiduciary duty, the question of whether commissions were paid "secretly" or whether "informed consent" needs to be obtained does not arise. However, the FCA regulatory framework still applies in terms of transparency and disclosure. As a result of the unfair relationship provisions in section 140A of the Consumer Credit Act 1974, a lender can still be liable for the acts or omissions of a motor dealer if they have not disclosed commissions in line with their regulatory obligations.

Motor finance redress scheme

Soon after the Johnson, Wrench and Hopcraft judgment was handed down by the Supreme Court, the FCA announced a consultation on the redress scheme for consumers who may have lost out where a lender has acted unfairly and, therefore, unlawfully.

The scheme will cover regulated motor finance (including hire-purchase, but not leasing) agreements taken out by consumers (including sole traders and small partnerships) between 6 April 2007 (when section 140A of the Consumer Credit Act 1974 came into effect) and 1 November 2024 (after the Court of Appeal judgment). The FCA expects eligible consumers to receive approximately £700 per agreement on average.

Strong objections to the proposed scheme were almost immediate. As well as the total cost of the scheme, key concerns include: 

• quantum and calculation method;
• time periods; and
• definition of "high commission".

The consultation on the redress scheme closed on 12 December 2025. The FCA expects to publish its policy statement and final rules in February or March 2026.

FCA's Mortgage Rule Review

In 2025, the FCA published CP25/11 on simplifying rules and increasing flexibility (May), DP25/2 on reforms to its mortgage rules (June), and PS25/11 following feedback to CP25/11 (July). Rule and guidance changes came into effect on 22 July 2025, making it easier to remortgage with a new lender and reduce the overall cost of borrowing through term reductions. DP25/2 considered the wider mortgage market and conduct regime, seeking input on revising responsible lending rules, amending the framework for later life lending, and increasing flexibility to promote consumer understanding. Firms should look out for any further consultations launched as a result of feedback to DP25/2.