Stablecoins: From Speculation to Payment Instrument?

What the FCA’s New Regime Means for PSPs & EMoney Firms

Imagine using a stablecoin like you use your bank account. Sending, receiving, and holding value in everyday payments.  That possibility is edging ever closer with Stablecoins (fiat backed digital tokens). And now regulators, firms and markets are looking towards this as a potential alternative to traditional payment rails.

However, the path from novelty to mainstream payment instrument may be a little more complicated. But for PSPs and EMIs there are some real opportunities, risks, and choices that should be made now! 

The Financial Conduct Authority's (FCA) recent consultation paper (CP25/14) marks a significant turning point, with stablecoins under active regulatory design, but not yet fully payment instruments in the same way we think about e-money under existing frameworks. 

The government has not yet amended the Payment Services Regulations (PSRs 2017) to bring payments using stablecoins into the regulated scope of “payment instruments.” That means consumer protection, rights, and obligations tied to “payment instrument status” are not fully triggered yet in many cases.   

Despite this, the FCA hints, "The FCA’s stablecoin framework could turn what was once a volatile investment token into tomorrow’s trusted payment rail."  

So, for UK PSPs and e-money firms, stablecoins are on the horizon, but the regime isn’t fully baked yet. Planning now means positioning for that shift.  

This isn't just an interesting development; it's a critical juncture. Stablecoins could soon compete with, or complement, your existing payment instruments for settlement and wallet services, presenting both exciting new opportunities and immediate compliance obligations. 

Understanding the FCA’s New Regime

At its core, the FCA's new approach aims to bring clear, sensible regulation to stablecoins used for payments. This isn't about stifling innovation, but about ensuring the market is safe and trustworthy. The regime focuses on specific activities, primarily: 

• Issuing Stablecoins: Who can create and bring stablecoins to market. 

• Safeguarding & Custody: How customer assets and funds related to stablecoins will be protected. 

The main objectives driving these proposals are clear: robust consumer protection, maintaining financial stability, ensuring interoperability with existing financial systems, and upholding market integrity. 

This regulatory push is underpinned by HM Treasury’s broader legal framework for crypto assets, which came into effect in April 2025. For stablecoins that could be used at a payments-system scale, there's also significant coordination with the Bank of England to ensure systemic stability. 

In essence, the FCA's focus areas include: 

• Who can issue fiat-backed stablecoins 

• How customer funds must be safeguarded (with alignment to CASS principles) 

• Prudential and governance requirements for firms involved 

• Expectations around disclosure, auditing, and customer redemption rights 

What This Means for PSPs & E-Money Firms  

To see where the UK may be headed, it helps to compare the UK with places that are slightly further along in the journey or where there are different approaches. For example, MiCA in the EU, which requires issuer authorisation, reserve and governance rules, with strict transparency, giving firms clarity that stablecoins are payment-adjacent instruments. Or Singapore, where Single Currency Stablecoins (SCS) brings strong requirements on reserves, redemption, audit and consumer protection, signalling what a safe stablecoin payment looks like – a high bar! 

There are some key levers and considerations for UK payments firms to watch (and act on) if they want stablecoins to work safely and lawfully as payment instruments, or perhaps even exploit those shifts as an opportunity. PSPs could soon leverage stablecoin rails for faster, more efficient settlements, particularly for cross-border transactions or innovative card-less payment solutions like pay-by-link services and API-driven accounts 

The main challenge lies in the stringent requirements for safeguarding and prudential standards, which are likely to mirror, or even exceed, current e-money regulations.  

Firm’s compliance functions must prepare early for meticulous segregation of funds, robust redemption processes, and detailed audit trails. 

Expect the FCA to maintain its sharp focus on data and resilience. Transparency in customer communication, recoverability of services, and rigorous oversight of third-party outsourcing arrangements will be critical – drawing directly on lessons learned from existing payment and e-money supervision. 

Predictions and Looking Ahead 

If we look at the approach of other countries, then we could confidently assume that stablecoins will become payment instruments, although the UK is more likely to shift more cautiously and with phased adoption (non-systemic to systemic). 

And if your firm isn’t prepared, then you risk being left behind. Those that are stablecoin-ready (custody reserves, regulatory compliance) ahead of time are more likely to gain market share, especially in cross-border / B2B payments.  

As we are already seeing, not every jurisdiction will adopt the same model. MiCA and Singapore, as examples, are likely to be models from which the UK are likely to borrow some elements; governance, consumer protections, enforcement posture).   

If firms try to push stablecoins without transparency, or if there is a reserve shortfall, redemption lag, etc. expect reputational impact. Trust is always more important than novelty. 

For EMIs, the notion of stablecoins could reshape how they operate, but it would be wise to think about overlaps and regulatory duplication; e-money regime + stablecoin regime + payments regime.  

Final Thoughts 

 

Will stablecoins become payment instruments? Probably yes, but not everywhere, not immediately, and only where the regulatory, technical, and risk foundations are strong. For UK PSPs and EMIs, the time is now to do the homework: assess reserve standards, redemption mechanics, regulatory permissions, and scale risk. Those who move early on the foundations will better manage both upside and regulatory scrutiny. 

If your firm is considering stablecoin-enabled payments or issuance, you might benefit from mapping what your framework would need to look like if stablecoins were declared payment instruments, then use that as a design standard. That way, you’re building for the future, not reacting to it. 

“Stablecoins are no longer just a crypto concept—they’re becoming part of the UK’s financial plumbing. For PSPs and e-money firms, now is the time to understand where your business sits within the FCA’s new regime.” 

Gillian Roche-Saunders, Partner, Adempi 

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The regulatory landscape for stablecoins is rapidly taking shape. Are you prepared for what's next? 

Adempi helps firms navigate regulatory change with targeted healthchecks, expert guidance and practical solutions to ensure your business remains compliant and competitive.  

Get in touch with Adempi’s Payments & E-Money team to discuss how the upcoming FCA framework might affect your operations and future product strategy.  contact@adempi.co.uk or on 0203 925 4761

Or to find out more about our services you can head to our webpage: Adempi - FCA Compliance Consultants.