UK Regulators Put Tokenization at Center of Payments Overhaul

The move gives stablecoin issuers and crypto payment firms a clearer path into the regulated payments system. The Treasury has already said fiat-backed stablecoins will fall under a bespoke regulatory regime. The payments roadmap now gives those tokens a specific role in the retail infrastructure. Firms that have been waiting for a regulatory framework now have a clearer timeline. The Treasury's document said the infrastructure would be designed to accommodate both the Bank of England's digital pound and privately issued stablecoins, giving firms a single set of technical standards to build against. The Treasury plans to introduce legislation for fiat-backed stablecoins later this year, aligning with the payments roadmap.

Several countries have tested tokenized payments or digital currencies. Singapore and the European Union are also working on tokenized payment systems. The UK's approach differs by targeting multi-currency interoperability from the start. The Bank of England is separately developing a digital pound, and the Treasury said the retail infrastructure would be compatible with both the digital pound and private-sector stablecoins. That positions London to compete with other financial hubs that are developing tokenized payment systems.

For merchants, the system could reduce transaction costs and speed up settlement, the Treasury said. Consumers could see new payment options that work across currencies without the delays of traditional cross-border transfers. The Treasury said the system would enable instant cross-currency payments, reducing the need for intermediaries and lowering costs.

The Payments Committee includes representatives from the Treasury and the Bank of England. The Financial Conduct Authority also participates in setting the technical standards. A public consultation later this year will invite feedback from banks and payment firms. The consultation will cover technical standards and governance. No date has been set for the first live transaction.