.svg)
The Financial Conduct Authority’s (FCA) letter to the prime minister highlights its 2025 progress, along with its 2026 priorities for payments, including variable recurring payments (VRPs), contactless reform, open finance and GBP-backed stablecoins.
Sent on December 9, 2025, the FCA’s letter outlines “ambitious new growth measures for 2026” and follows up on a similar letter from January, which pledged the regulator’s support for the government’s growth agenda.
In the latest letter, FCA chief executive Nikhil Rathi outlined progress against the commitments in the previous document and highlighted areas where further developments are expected in 2026.
For the payments industry, the document is less a status update and more an operational signal that the regulator intends to accelerate implementation across several high-impact areas:
- First, the integration of the Payment Systems Regulator (PSR) into the FCA is intended to improve regulatory alignment and reshape the sector’s oversight architecture.
- Second, changes to consumer payment rules, including the removal of contactless limits and the introduction of VRPs, will affect both product economics and the user experience.
- Third, a commitment to establish a delivery plan for open finance and data regimes signals a strategic shift toward platform-based payment innovation.
- Fourth, finalising frameworks for stablecoins and digital assets will shape the development of new payment rails and settlement mechanisms.
These points align with the National Payments Vision and reflect a focus on infrastructure modernisation and increased competition.
Strategic and operational implications
Although the integration of the PSR into the FCA is likely to continue through 2026, its impact may be felt sooner, potentially compressing the timeline from policy to implementation. Firms should expect shorter consultations, faster technical specifications and less opportunity to defer compliance.
Meanwhile, removing the £100 contactless limit would increase the pressure on issuers and acquirers to upgrade real-time risk scoring, telemetry sharing and behavioural analytics. Payment firms will need to implement robust risk assessments, fraud monitoring and customer communications.
This could be challenging for smaller providers, which may find it more difficult to develop sophisticated systems or manage the regulatory expectations around risk-based decision-making.
Given that the FCA states it will “launch” VRPs in 2026, payment service providers (PSPs), banks and acquirers will need to finalise dispute processes, liability allocations and settlement protocols. Merchant demand is likely to hinge on the clarity of these commercial foundations.
Similarly, the commitment to prioritising SME lending in the open finance roadmap signals a broadening of the data-sharing perimeter that will intensify competition between banks and fintechs, particularly around working-capital and cash-flow tools.
In addition, the plan for a clearer regime on GBP-backed stablecoins introduces the possibility of new regulated issuers, new treasury and reserve models and eventual integration into established payment infrastructure.
Prioritising stablecoins
The FCA made a point of emphasising its plans for stablecoins in 2026, featuring them in the heading of its press release announcing the letter to the prime minister.
In the letter itself, the regulator commits to finalising digital assets rules and progressing UK-issued sterling stablecoins as part of its pro-innovation agenda for 2026.
However, many in the industry are concerned that UK stablecoin regulation is moving too slowly and that the government’s approach risks the country falling behind.
Earlier this week, a coalition of parliamentarians separately wrote to the finance minister, urging the government to adopt a pro-innovation stablecoin regime to unlock investment, safeguard London’s global competitiveness and avoid regulatory outcomes that could deter issuance and usage.
The letter makes three key points:
- Stablecoins are reshaping financial infrastructure and have sizable on-chain transaction volumes that now rival traditional card networks.
- Elements of the current Bank of England (BoE) regulatory proposals, including restrictions on reserve interest and holding caps, risk making UK stablecoins uncompetitive and could redirect activity offshore.
- A forward-looking regulatory framework is essential to secure economic growth, technological innovation and the City’s strategic role in digital finance.
Development of a clear stablecoin regulatory framework is underway, but progress remains slow and priorities misaligned for many stakeholders.
The BoE and HM Treasury are consulting on a systemic stablecoin regime, including potential prudential and operational requirements for stablecoins used in core payment functions.
The FCA’s commitment to make stablecoin payments a priority for 2026, including inviting firms to sandbox experiments for UK stablecoin issuance, is unlikely to be enough to satisfy industry critics.
The current multi-pillar approach to stablecoin regulation, involving the FCA, BoE and HM Treasury, carries a risk of fragmented or overly restrictive outcomes.
For payments firms, the window to influence policy and prepare for integrated stablecoin participation is now. Active engagement, scenario modelling and cross-entity collaboration will be foundational to shaping a competitive UK stablecoin and digital payment ecosystem.
Preparing for a transformative 2026 in UK payments
The FCA’s letter and the parliamentarians’ stablecoin appeal together underline a sense that 2026 is set to be a year of accelerated regulatory action, technological innovation and intensified competition.
The integration of the PSR into the FCA and the appointment of a dedicated payments executive indicate faster policy implementation and tighter oversight. In consumer payments, innovations such as the launch of VRPs, the removal of contactless limits and the expansion of open finance signal a shift towards platform-based, account-to-account (A2A) models.
The position on stablecoins in the UK’s digital finance strategy remains somewhat unsettled, with concerns around regulatory fragmentation and restrictive proposals. Firms that share those concerns should actively engage with the consultations and sandbox trials, taking the opportunity to shape the UK framework as it develops.
Across the UK payments sector, firms that proactively adapt operational, commercial and regulatory strategies will be well placed not only to meet compliance requirements but also to capture the strategic advantages of a modernised, competitive payments ecosystem.
