🇬🇧The UK in 2026–2028: EMI Safeguarding, the FCA Crypto Regime and the Payments Reform

Concept

The United Kingdom is rebuilding the rules for money that sits outside a bank balance sheet, and the rebuild runs on three tracks that converge between 2026 and 2028. The first governs client money held by e-money and payment institutions: since 7 May 2026 the FCA's CASS 15 chapter supplements the safeguarding provisions of the Electronic Money Regulations 2011 and the Payment Services Regulations 2017, which remain in force, with reconciliations, an annual audit and monthly reporting.

The second moves the crypto market from anti-money-laundering registration into the full FSMA licensing perimeter: the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 were made on 4 February 2026, the FCA authorisation gateway is expected to open on 30 September 2026, and the regime commences on 25 October 2027. The third is the payments framework itself: on 14 July 2026 HM Treasury opened a consultation on modernising payment services regulation, which proposes to bring UK-issued stablecoins into the payments perimeter and runs until 6 October 2026.

All three answer one question from two sides: what stands behind the value on the screen — a bank's capital and the FSCS, a segregated account, a trust over reserves, or nothing — and which licence, how much capital and by which date a payments, custody or stablecoin business must have in place. The three tracks differ in what protects the money.

What the reform opens up is the other half of the picture: retail access to cryptoassets admitted to trading for retail with a compliant disclosure document, and to UK-issued stablecoins, on a licensed footing, and, if the payments proposals are carried through, one technology-neutral set of payment activities covering fiat, tokenised deposits and stablecoins alike. The parameters that decide both questions, as at 7 September 2026, are collected in one table.

Why the tightening: Ipagoo and the 65% shortfall

The FCA set out its reasoning in CP24/20 in September 2024. Among payment firms that became insolvent between the first quarter of 2018 and the second quarter of 2023, the average shortfall between funds owed to clients and funds safeguarded was 65%. This measures a safeguarding deficit, not customers' eventual recovery. The risk had grown with the sector. E-money issuers held about £18 billion in safeguarding accounts in 2023, payment firms held about £5 billion of relevant funds on any given day in 2023, and the share of consumers with an e-money account rose from 1% in 2017 to 7% in 2022.

The Ipagoo holding

The legal backdrop had been settled by the Court of Appeal in Baker v FCA (Re Ipagoo LLP) on 9 March 2022: the Electronic Money Regulations, read with the EU directives they implemented, do not impose a statutory trust over funds received from e-money holders. Without a trust arising by statute, what a customer recovered in an insolvency depended on how well a particular firm had segregated its funds — a fragile position for a sector in which 7% of consumers held an e-money account by 2022.

CASS 15 since 7 May 2026

Policy statement PS25/12 of 7 August 2025 wrote an interim "supplementary regime" into a new CASS 15 chapter of the FCA Handbook, in force from 7 May 2026. It leaves the two safeguarding methods in place — segregation at a bank, or insurance or a comparable guarantee — and surrounds them with the controls investment firms have lived with for years. Five duties carry the regime, and each one is aimed at the same failure: a shortfall discovered only after the firm has collapsed.

The ordinary audit-exemption lookback is at least 53 weeks. From 7 May 2026 until 14 May 2027, SUP TP 3D instead tests the period since the rule took effect: safeguarding more than £100,000 must never have been required since 7 May 2026.

Segregation that a client cannot see is now visible to the regulator every month. The EMI carries an investment-firm level of operational load — an auditor, reconciliation records and a documented analysis of which balances count as relevant funds — while its customer gets transparency without a guarantee scheme: the FCA's safeguarding page describes the reports, and protection depends on compliance with the chosen safeguarding method.

Who is caught

The regime applies to authorised payment institutions, authorised and small e-money institutions, credit unions issuing e-money and small payment institutions that opt in. Payment institutions that solely initiate payments or provide account information are outside it.

The deferred statutory trust

The FCA's end-state is a "post-repeal regime": a CASS-style statutory trust over relevant funds, modelled on client money at investment firms. PS25/12 deferred it. The regulator will review the interim regime once a full audit period has completed and consult on further proposals only if changes are necessary, and the timing depends on HM Treasury's approach to revoking the PSRs and EMRs. The July 2026 payments consultation makes no statutory-trust proposal. No date exists.

EMI versus bank: where the pounds sit

The reform leaves the central distinction intact. An EMI is not a bank: FSCS does not compensate an EMI's own failure. Under PRA PS24/25 deposit protection rose to £120,000 per depositor for bank failures on or after 1 December 2025, temporary high balances are covered up to £1.4 million for six months after qualifying life events, and the investment limit stays at £85,000.

EMI funds are safeguarded through segregation, or insurance or a comparable guarantee. If the safeguarding bank fails, FSCS may compensate eligible customers through look-through protection; this does not cover the EMI's own failure. Three questions separate the two kinds of provider.

The consequence for a holder is that a "UK account" opened with an e-money institution is e-money without FSCS cover for the EMI's own failure, and the FCA Register shows which side of the line a provider stands on. Whether money at an EMI is recoverable turns on which bank holds its safeguarding account and in which jurisdiction; how that chain is read is explained in the guide to correspondent banking and client-money protection, the clearing banks that serve EMIs are profiled separately, and the routes into a British bank account are in the guide to UK bank accounts for non-residents.

Crypto: from MLR registration to full authorisation

HM Treasury published a first draft instrument on 29 April 2025, and the Cryptoassets Regulations 2026 (SI 2026/102) were made on 4 February 2026 after approval by both Houses. Regulation 1 fixes the full commencement day as 25 October 2027; the instrument came into force earlier only so that the FCA could make rules and receive applications.

Seven activities and the designated activities

Regulation 40 inserts seven regulated activities into the Regulated Activities Order. Alongside them, Part 2 of the instrument creates designated activities for public offers, admissions to trading and market abuse in qualifying cryptoassets, which bind every participant in the market, authorised or otherwise. The seven activities map onto the familiar roles of an exchange, a broker and a custodian.

Two readings of the list matter. Staking is regulated as arranging staking, while the technical-service exclusion for a validator requires that it does not hold itself out as offering qualifying cryptoasset staking to the public. Stablecoin issuance under article 9M is a cumulative test — an offer from a UK establishment, a coin created by the issuer or its group, and redemption and reserve-holding run from the UK — and minting alone is excluded; when issuing counts as carried on in the UK is governed separately by the Ninth Case that regulation 41 adds to section 418 FSMA.

The gateway: expected 30 September 2026 to 28 February 2027

The FCA's gateway is expected to open on 30 September 2026 and to close on 28 February 2027; the period is fixed by FCA direction under regulation 52, which requires at least 28 days and an end at least 28 days before commencement. The consequences of each route are fixed by the instrument itself, and the three routes lead to different places.

A firm that applies in the window and is not yet determined on commencement day is treated under regulation 53 as if the new activities were not yet in force, for up to two years. A firm applying after the window but before 25 October 2027, without authorisation by that date, enters regulation 56 from commencement: it may only perform pre-existing contracts, with no new contracts even for existing clients. Regulation 60 limits promotions to those necessary to perform those contracts. A firm that never applies must run off its UK cryptoasset business before 25 October 2027 or risk breaching the general prohibition.

For firms holding an anti-money-laundering registration, the registration does not convert. A FSMA Part 4A application is a separate exercise, the MLR gateway continues meanwhile, and the FCA says MLR applications filed after 31 July 2027 are unlikely to be determined before the regime starts. Firms already authorised under FSMA vary their permissions instead of applying afresh, and pre-application support meetings have been available from July 2026.

Until commencement, a firm with neither authorisation nor registration may still reach UK consumers through promotions approved by an FCA-authorised s 21 approver; a firm already operating under regulation 56 needs no approver for promotions necessary to perform pre-existing contracts. The full set of UK authorisations and determination times sits in the FCA authorisation map.

Overseas firms: the consumer test

The territorial rule is written into section 418 FSMA by regulation 41. An overseas firm dealing or arranging where a qualifying cryptoasset is sold to, or bought from, a consumer is treated as carrying on the activity in the UK unless an intermediary authorised under Part 4A for operating a trading platform (9S) or dealing as principal (9T) performs that activity in the transaction. For safeguarding and staking, the exception requires direction by a person with Part 4A permission for that same activity.

Here, a consumer is an individual in the UK acting outside their trade, business or profession. This is a specific section 418 test; other bases of UK territorial scope require separate assessment.

The FCA's finalised guidance FG26/7 sets out its approach to international firms, and the perimeter guidance consulted on in CP26/13, which closed on 3 June 2026, is due in final form in the autumn of 2026.

What the rulebook demands

On 30 June 2026 the FCA published five policy statements: PS26/9 on admissions, disclosures and the market abuse regime for cryptoassets, PS26/10 on stablecoin issuance, PS26/11 on the regulated activities, PS26/12 on the prudential regime and PS26/13 on how the wider Handbook applies, with finalised guidance on the Consumer Duty, operational resilience and international firms. CP26/4, published on 23 January 2026, closed on 12 March 2026 and is answered by that package.

Custody of client crypto goes into a new CASS 17 chapter under PS26/11, adapted from the client-asset rules. CASS 17 requires client cryptoassets to be held on non-statutory trusts, subject to specified exceptions, alongside segregation, records and reconciliation. On UK cryptoasset trading platforms, UK retail investors may be given access only to assets admitted to trading for retail with a compliant disclosure document, unless the product is a UK-issued qualifying stablecoin; retail orders must be executed on a UK-authorised execution venue, and settlement is expected to be initiated within 24 hours of execution. As at 7 September 2026 the FCA had said it intended to consult in September 2026 on a three-month extension, to January 2028, of the date by which intermediaries must hold clients' consent to their updated execution policies; no consultation had been published.

The minimum own funds requirement under PS26/12 is the highest of a permanent minimum, a fixed-overheads requirement and K-factors; the stablecoin coefficient K-SII was cut from 2% to 1% in the final rules. The permanent minimums are graded by activity.

This formula sets a floor: assessing the risks of ongoing business and orderly wind-down can require more capital.

Stablecoins: two tiers — FCA and the Bank of England

The FCA tier

Under PS26/10 an ordinary issuer holds the backing pool on a statutory trust under CASS 16, with a separate pool and trust for each coin. Required checks precede the clock. Redemption ordinarily completes by the end of the next business day after coin receipt: by a payment order, or credit to the holder's account with the issuer. Exceptions cover legal or court restrictions, slower conversion into another requested currency with advance timeframe disclosure, and suspension under the rules.

Interest or income from the pool may not be passed to holders. All intragroup custodians together may hold at most 20% of the pool, subject to the specified disproportionality exemption. Backing-asset and token-quantity disclosures are updated at least every three months; other information is corrected when inaccurate. Permitted assets are short-term deposits and short-term government debt; longer-dated government debt, public-debt constant-NAV money market funds and repos are allowed subject to conditions.

The systemic tier

A coin that HM Treasury recognises as systemic under the Banking Act 2009 passes into joint supervision: the Bank of England leads on reserves, capital and failure, the FCA keeps conduct, the Consumer Duty and financial crime. The split is set out in the joint approach paper of 30 June 2026, with a typical transition of 12 to 36 months.

The Bank's policy statement of 22 June 2026 replaced the holding limits it had consulted on in November 2025 (£20,000 for individuals, £10 million for businesses) with a temporary issuance guardrail of £40 billion per product, which it expects to loosen and eventually remove. In steady state, the backing pool comprises at least 30% unremunerated central bank money and at most 70% short-term UK government debt with up to six months' residual maturity.

For issuers recognised as systemic at launch, a separate step-up approach can allow up to 95% such government debt and at least 5% central bank money before live issuance. The Bank sets the transition to 70/30 individually as the firm scales.

Under the draft Code, redemption is due within 24 hours of a full request after required checks and coin receipt. Completion ordinarily means making a payment order, or crediting an account the issuer operates for the holder; exceptions cover legal requirements, court orders and another requested currency. Comments on the Code run to 22 September 2026, the final Code is expected by the end of 2026, and the regime is intended to operate from 2027 with no date yet set. The two tiers are compared on five points.

A sterling coin that grows into systemic scale therefore has to rebuild its reserve book and its redemption mechanics, which is why the Bank may grant up to a year for its settlement account and asset transition and up to two further years for capital through an individual direction; relief is not automatic. Market context and the comparison with MiCA and the GENIUS Act sit in the explainer on stablecoin types and regulation. On 27 August 2026 HM Treasury announced a secondary innovation objective for the Bank covering systemic payment systems, including those using digital settlement assets, subordinate to financial stability, which it said it would deliver by government amendment to the Financial Services and Markets Bill.

Payments: HM Treasury's July 2026 consultation

The lineage runs from the National Payments Vision of November 2024, which diagnosed "significant regulatory congestion" and asked the FCA to become the open banking regulator, through the Payments Forward Plan of 26 February 2026, to the consultation of 14 July 2026. That consultation is the legislative half of the safeguarding story and the payments half of the stablecoin story, and it proposes to keep the perimeter in statute while delegating the detail to the FCA. Responses are due by 6 October 2026; the paper names no implementation date, and the only dated commitment is a statutory instrument under the Data (Use and Access) Act 2025 by the end of 2026, handing the FCA the powers to regulate open banking. The proposals and their status as at 7 September 2026 are these.

Under the proposals the detailed conduct, safeguarding and reporting requirements would leave the statute book and reappear as FCA rules, while the e-money issuance activity would survive as a distinct permission. Safeguarding done in the course of payment services would sit in the payments regime, removing the need for a separate crypto safeguarding permission. Whether an authorised issuer should then provide stablecoin payment services without an additional permission is put as an open question, transfers of overseas-issued stablecoins would stay out of payment services and be caught by the crypto intermediation activities, and the paper puts a further question on stablecoins from recognised jurisdictions. The EU is running the parallel exercise under PSD3 and the PSR.

The transitional instrument for stablecoin payments

For the period before that reform is in force, HM Treasury has published a draft amending instrument of 21 April 2026, which remains a draft as at 7 September 2026: comments closed on 22 May 2026 and nothing has been laid. It would carve UK qualifying stablecoins out of dealing and arranging, keep stablecoin lending and borrowing and safeguarding in scope, remove stablecoin-only transactions from the financial promotion regime except lending and borrowing, and bring forward the rule that reserves are not a collective investment scheme. The institutional side is moving in parallel: the Financial Services and Markets Bill, at Lords report stage from 7 September 2026, would abolish the Payment Systems Regulator and transfer its functions to the FCA, and it is not yet law.

Sequence to 2028

The dates fall in an order that matters, because each step changes what a firm may do the next day.

Three of these dates — 22 September, 30 September and 6 October 2026 — fall within a fortnight of each other, so the autumn of 2026 sets the shape of all three tracks before any of them is complete.

The strategic choice remains the UK against the EU, whose regime is MiCA: in the UK an issuer obtains one FCA authorisation and, if HM Treasury recognises the coin as systemic, supervision by the Bank of England alongside the FCA. The regime comparison sits in the map of financial licences, and the asset class from the holder's side in crypto for private wealth.