UK retail payments plan backs tokenization and digital money interoperability

Regulators in Britain have issued an updated national blueprint for retail payments that urges building infrastructure capable of handling tokenization along with seamless connections to emerging types of digital money.

UK regulators push for tokenized payments in core infrastructure. On Thursday, HM Treasury released the document for the Payments Vision Delivery Committee as part of the official roadmap to modernize retail payment systems. Officials said embedding tokenization and new digital money options would help deliver a “diverse multi-money ecosystem.”

The paper highlights “programmable payments, including those that rely on tokenization” among possible “product-level arrangements” that could drive fresh payment services. It also calls for systems that let innovative digital money forms work alongside conventional payment rails, building on the National Payments Vision issued in November.

Timeline aligns with new UK crypto regulatory framework. The Financial Conduct Authority released its comprehensive crypto rulebook days earlier. Under the plan, the licensing window for crypto companies runs from September until Feb. 28, 2027, with the full regime taking effect on Oct. 25, 2027.

Trading platforms, custodians, stablecoin issuers, staking firms and other intermediaries will need FCA authorization before they can operate legally in the country.

Prior government steps targeted stablecoins and tokenized deposits. In April the UK government pledged to review its payments regulations to encourage adoption of fresh technologies such as stablecoins and tokenization. On April 21, HM Treasury and Economic Secretary to the Treasury Lucy Rigby said the review would include consultation on unified rules for conventional and tokenized payments, including stablecoins and tokenized deposits.

Bank of England and FCA prepare wholesale markets for tokenization. The following month the Bank of England suggested moving its core settlement system toward near-24/7 operations. That step forms part of joint work with the FCA to ready wholesale markets for tokenized finance, which would also ease cross-border transfers and novel settlement approaches.

Feedback on the Bank of England proposal is due by July 3, after which a summary of responses will appear in the summer. Shortly before that announcement the FCA noted that tokenization and distributed ledger technologies could improve efficiency in fund management and foster growth across the UK asset management industry.