Your guide to this week in regulation

In the aftermath of searching questions and strong feedback from the Treasury Select Committee, the Financial Conduct Authority (FCA) has announced a major review of the long-term use of AI in retail financial services. The questions posed by the FCA as part of this review are fundamental to the future shape of regulation. The intended audience is rightly broad. The window for responses is perhaps surprisingly narrow, and yet reflective of the imperative for regulators to try to keep up with the unrelenting pace of change. 

This week, the influence of innovation features heavily elsewhere as we highlight the latest FCA consultation covering firms wanting to undertake qualifying crypto-related activities under the new incoming regime; as well as the call for latest applications for the FCA’s AI Live Testing service. 

Elsewhere, we describe latest developments on fees in open banking at the intersection of multiple regulators, and the very recent Public Offers and Admissions to Trading regime which forms part of a wider process of capital market reform. 

FCA launches major AI review 

The FCA has launched a wide-ranging review to examine how advanced AI could reshape retail financial services. Led by Sheldon Mills, the work builds on the FCA’s existing AI programme, including its AI Lab, live testing partnership and Supercharged Sandbox. The regulator notes that AI is already embedded across the sector and expects rapid advances in generative and agentic systems to transform markets, competition and consumer behaviour through to 2030. 

The review focuses on four areas that matter to senior leaders:  

• How AI may evolve
• How it could alter firm competition and UK market structure
• How consumers will use and be influenced by AI, and 
• How regulators may need to adapt.  

Wholesale markets remain out of scope, although links will be considered where relevant. The FCA stresses it does not plan to introduce AI‑specific rules, instead relying on its principles-based framework, including Consumer Duty. 

The FCA is seeking stakeholder feedback by Tuesday 24 February 2026, which will inform recommendations for its Board in summer 2026. Firms, consumer groups and tech providers can submit comments to TheMillsReview@fca.org.uk. 

Read more on the Mills Review 

FCA consults on final crypto rules 

The FCA has opened its final consultation on the UK’s upcoming cryptoasset regime and is asking firms to respond by 12 March 2026. The regulator has set out how Consumer Duty, conduct standards, redress, safeguarding and reporting will apply to cryptoasset firms ahead of the new gateway opening in September 2026. The proposals aim to create a market that supports innovation while helping customers understand and manage risks. 

Key points include planned rules on credit for crypto purchases, competency expectations for staff, treatment of retail collateral in borrowing arrangements, and the approach for overseas crypto firms serving UK customers. The FCA also proposes how the Senior Managers and Certification Regime will apply and how location requirements should work to ensure effective oversight. 

The FCA stresses that crypto remains largely unregulated today other than for financial promotions and financial crime, and warns firms to prepare for the shift to a regulated regime. Firms should review CP26/4, assess how the proposals affect their operations, and submit feedback before the deadline. 

Read more on FCA seeking feedback on further rules for cryptoasset firms  

FCA Opens AI Testing Applications 

The FCA has launched applications for the second cohort of its AI Live Testing service, a pioneering initiative in UK financial markets. This programme supports firms ready to deploy artificial intelligence by providing tailored regulatory guidance and technical expertise from Advai. The aim is to ensure AI is implemented safely and responsibly for consumers and markets. 

Participants will explore critical areas such as governance, risk management and monitoring, helping firms meet regulatory expectations while advancing innovation. The FCA also seeks insights from these engagements to shape its future approach to AI in financial services. AI Live Testing complements the FCA’s Supercharged Sandbox, which caters to firms in earlier stages of AI development. 

Applications close on 2 March 2026, with successful firms notified by mid-March. Testing begins in April. Interested firms should review the FCA’s Terms of Reference and submit their application promptly. For queries, contact AILiveTesting@fca.org.uk. 

Read more on applications for next round of FCA’s AI Live Testing 

Read more on the AI Lab 

Regulators clarify open banking fees 

The FCA and Payment Systems Regulator have confirmed they will not prioritise a Competition Act investigation into the UK Payments Initiative’s proposed access fee for commercial Variable Recurring Payments. The move gives the UKPI the certainty it needs to continue developing its product without delay. The Competition and Markets Authority has aligned with this position, noting that businesses should not be discouraged from collaborating where it could benefit consumers or the wider economy.
 
Commercial VRPs are an emerging open banking tool that lets consumers give trusted third parties secure, ongoing permission to manage payments. They promise stronger control for consumers and lower processing costs for businesses. The regulators view the UKPI model as an important bridge until the government delivers a full legislative framework, expected by the end of 2026. The non prioritisation approach will last until the new framework is in place or until July 2027. 

Readers should note that the FCA, PSR and CMA may change their stance if new information comes to light. Firms involved in UKPI development should expect ongoing monitoring, reviews of the pricing model and a requirement to finalise governance documents. 

Read more on open banking pricing models 

New rules raise scrutiny on securities 

The FCA’s update on the new Public Offers and Admissions to Trading regime signals a clear expectation that firms strengthen how they assess, promote and oversee high risk securities such as mini bonds and loan notes. The regime, which took effect on 19 January 2026, brings both transferable securities and non transferable debt securities into scope and gives the FCA new, but still limited, powers over unauthorised firms. 

The FCA highlights ongoing concerns about promotions that overstate capital protection and understate the risk of loss. For regulated firms, this reinforces the need for robust product governance, clear target market definitions, and stronger oversight of introducers, promoters and appointed representatives. Weak due diligence, weak monitoring and poor clarity in consumerfacing materials could expose firms to regulatory action, especially where high risk instruments are being sold to inappropriate investors. 

Compliance functions should revisit conduct controls, approval processes for financial promotions, and internal frameworks for identifying and escalating concerns about unauthorised activity. The FCA encourages firms to direct customers to its Firm Checker and Warning List and to report unauthorised firms promptly. 

Read more on the new regime for securities and what consumers should look out for