Britain is moving to create a single payments regulatory framework that would treat stablecoins and tokenised deposits alongside existing payment services.

On April 21, blockchain outlet The Block Crypto reported that the UK Treasury unveiled the direction of its payments regulatory overhaul at London Fintech Week.

The core of the overhaul is to update the system within one framework, rather than treating traditional payment services and digital asset-based payments separately. The UK Treasury and City Minister Lucy Rigby said in a statement the step aims to support innovation and modernise Britain’s payments system while keeping pace with shifts in digital finance such as tokenisation and blockchain-based payment systems.

The overhaul includes a plan to place stablecoins used for payments under a future issuance regulatory regime. It also plans to expand the Financial Conduct Authority’s open banking oversight powers and to review adjustments to regulation for payment activities carried out by artificial intelligence agents.

It also signalled new legislation to reduce the administrative burden on companies seeking to offer stablecoin payment services. The UK government is also pushing to expand the FCA’s authority so it can respond to changes in open banking rules.

The government has also named an appointee to lead development of tokenised wholesale financial market infrastructure. It appointed Chris Woolard, an EY partner and former interim chief executive officer of the FCA, as wholesale digital markets champion. He will lead work to build a tokenised wholesale financial system.

Industry support funding was also allocated separately. The UK Treasury said it will provide 1 million pounds from April to the Centre for Finance, Innovation and Technology to help collaboration across the industry.

The UK government is positioning the move as an extension of its strategy to strengthen the competitiveness of its financial services. Rigby described fintech as a "true success story" for Britain and said the government is supporting the sector to drive faster growth in financial markets and strengthen global competitiveness. She also called the package its latest step to build a safe and competitive payments ecosystem to seize new opportunities in a rapidly changing technology environment.

The UK government also assessed that digital assets and blockchain technology have "transformative potential" to change how financial services are used. It said the way consumers and companies interact with financial services could be reshaped, and Britain can play a leading role in the transition based on its existing financial industry base, fintech ecosystem and regulatory approach.

Meanwhile, the market also raised a point that actual adoption will not happen solely through regulatory overhauls. Coincover Chief Operating Officer Anthony Young said the government’s vision for a payments ecosystem and its stablecoin- and tokenisation-focused approach are "heading in the right direction", but "adoption levels are not determined by regulatory design alone". He stressed that to broaden institutional participation, operational resilience such as custody frameworks, key management systems and disaster recovery measures must also be in place within the regulatory environment.

The UK government plans to soon begin a separate consultation on overhauling regulation of payment services and e-money. This is expected to lead to follow-up work aligned with a 10-year plan to make Britain the "global centre of choice" for financial services and with the Leeds reform direction.