Freshfields Fintech: Our Predictions for 2026

We have once again canvassed opinions from our Freshfields global fintech team for the year ahead, as we did in 2021, 2022, 2023, 2024 and 2025. We set out our predictions for 2026 across different jurisdictions. 

1. Global FinTech M&A: The Return of the Megadeal

In 2025, global M&A activity saw a decline in overall deal count but a rise in deal values, making this the year of the ‘megadeal’. Fintech largely tracked this trend for the first half of the year with deal volumes slightly lower in early 2025 compared to 2024 but picking up toward year-end. Notable transactions in the fintech space in 2025 included Lloyds acquiring Curve, Allica Bank purchasing SME credit and payments startup Kriya, Starling Bank acquiring accounting platform Ember, Banked buying VibePay and IG Group taking over investment app Freetrade. As well as strong strategic transactions undertaken by incumbents and between fintechs, private equity continued to drive the volume of larger deals in the market, underscoring the variety of players involved in Fintech M&A and, ultimately, strong confidence in the sector. 

Looking ahead to 2026, we expect an uptick in fintech M&A, including consolidation between smaller fintechs, strategic acquisitions by incumbents and established fintechs, as well as potentials IPOs for now quasi-incumbents (perhaps the long-rumoured IPOs of Stripe, Revolut and Monzo?). We see activity in 2026 driven by several factors:

• Market maturity and consolidation: Saturation of consumer fintech tools and profitability challenges will push smaller fintechs and their investors toward strategic exits, while successful incumbents will continue to expand their product offering through acquisitions. We also expect fintechs with novel products or large customer bases to seek further capital and potentially also implement inorganic growth themselves through M&A.
• Funding and compliance pressures: Regulatory demands and capital constraints, particularly on smaller fintechs, will accelerate consolidation.
• Permissive regulatory regimes: Large financial institutions will increasingly enter the tech space, growing capabilities through product-focused M&A rather than jurisdictional plays.
• Global expansion: We expect leading fintechs, like Wise, Monzo, Revolut and PayPal, to deepen US market penetration.
• Continued focus on AI capabilities: AI continues to be a key driver for deal activity in the FinTech space (amongst other markets, for a deeper dive on this see our blog post here), as established fintechs and incumbent financial institutions seek to innovate their product offering. We expect that startups with an AI offering will continue to be popular targets for M&A activity this year.

While certain consolidation attempts and strategic acquisitions may draw scrutiny from a regulatory perspective and require antitrust and/or foreign direct investment approvals, we do not expect this to counteract the strong headwinds for fintech M&A. For those deals that are likely to draw scrutiny and are cross-border in nature, we expect regulatory fragmentation across borders will continue to add complexity to negotiations and in particular on regulatory risk allocations (as set out in our blog post here). 

2. Tokenising the Future: A New Hope 

As discussed in our January 2026 blog post the tokenisation of real-world assets refers to the process of converting ownership rights over assets such as real estate, art, commodities, currency, government and corporate bonds into digital tokens on a DLT-based blockchain. The term “tokenisation” can also be used in relation to native cryptoassets.

Tokenisation, and the development of financial market infrastructure to enable this, will continue in 2026 although regulatory approaches remain inconsistent across jurisdictions. Progress toward harmonisation is anticipated but will likely be slow due to the fragmented nature of existing rules and guidance. 

Commercial adoption is accelerating; there has already been a proliferation of asset tokenisation platforms (see our June 2025 blog post) - tokenised custody solutions, trading infrastructure and distribution channels are also steadily making their way into the financial ecosystem. 

In the UK, the FCA is advancing a roadmap for digital assets, including support for tokenised fund registers through its Blueprint model and ongoing work with the Bank of England (BoE) on the Digital Securities Sandbox (as mentioned in our May 2024 and October 2025 blog posts). 

In the EU, there are already frameworks that permit the native issuance of securities on DLT such as in Germany. The EU’s DLT Pilot Regime has seen mixed success and the “Market Integration Package” (find our client briefing here), if adopted, will significantly increase flexibility under the current DLT Pilot Regime and make it permanent. In 2026, the ECB will also be progressing initiatives such as Pontes - a pilot solution that links trading platforms and TARGET services - and will launch an exploratory initiative for a shared ledger bringing together central and commercial bank money and other assets on a single platform (Appia).

In the US, regulatory engagement is rising – the SEC’s recent non‑action letter in relation to the launch of a pilot version of its securities tokenisation programme signals a willingness to allow tokenisation to further develop. 

As discussed here, the Hong Kong Monetary Authority (HKMA)’s “Project Ensemble”, a sandbox to facilitate the region’s tokenised asset market, entered its pilot phase in late 2025. Leading the charge, the Hong Kong government “will regularise the issuance of tokenised Government bonds”. We expect momentum to continue throughout 2026. 

3. Cryptoassets: Developing in Harmony?

In last year’s blog post, we predicted that 2025 would see significant cryptoasset developments, and this has certainly proven true, with cryptoasset valuations hitting all-time record highs in 2025. The surge in valuation and market participation has inevitably sharpened the focus of regulators globally, and we anticipate that 2026 will be a pivotal year with key developments taking shape on both sides of the Atlantic.

In the US, the federal banking agencies have moved to rescind or reverse prior guidance that discouraged banks from crypto-related activity (see our blog post). The leadership at the federal banking agencies have issued interpretive guidance clarifying the permissibility of certain crypto activities and indicated that they plan to further provide clarity on permitted activities and respond to new use cases in 2026 (see our outlook). 

In the EU, the push is towards centralisation and harmonisation. Attention in 2026 will turn to legislative negotiations on the ambitious aforementioned ‘Market Integration Package’ proposed in late 2025. This landmark proposal aims to ensure a level playing field and supervisory convergence by pooling supervision of crypto-asset service providers (CASPs) at the EU level under ESMA. More immediately, pursuant to EBA’s no-action letter, a key transition period ends on 2 March 2026, making a dual license under the Markets in Crypto-Assets Regulation (MiCAR) and PSD II mandatory for certain CASPs transacting electronic money tokens (see our blog post). 

The FCA is currently consulting on proposed: (1) rules and guidance for firms conducting regulated cryptoasset activities; (2) requirements for admissions, disclosures and a market abuse regime for cryptoassets; and (3) prudential requirements for cryptoasset firms. Responses to these consultation papers (CP25/40, CP25/41, and CP25/42) are due by 12 February 2026 and the legislation is expected to come into force on 25 October 2027 – with the application gateway for the authorisation of cryptoasset firms expected to open before this date. We explore the challenges of bringing cryptoassets within the UK regulatory perimeter here. 

In Hong Kong, regulatory momentum accelerated at the end of 2025, with the Securities and Futures Commission (SFC) issuing consultation conclusions proposing new licencing regimes for virtual asset dealers and custodians – a move that would clarify and expand the regulatory perimeter for virtual asset activities. Two additional SFC circulars enhance the virtual asset trading platform (VATP) framework by widening the range of virtual assets and tokenised products VATPs may list, distribute, and custody, and by allowing integration with intra-group liquidity via a shared order book. 

4. Stablecoins and CBDCs: A GENIUS awakens?

Stablecoins

Stablecoins saw increased adoption during 2025 are expected to see a continuation of growth in 2026. It is safe to say that USD stablecoins are leading the way at the moment – a blog post published on the ECB’s blog in July 2025 acknowledged that the global market is increasingly dominated by US dollar-based stablecoins which account for 99% of total stablecoin market capitalisation. That leaves some way for other fiat-backed stablecoins to catch up – but we think there will be sufficient political and central bank interest to ensure that it is not only USD stablecoins that will be widely-adopted. 

In the US, Congress enacted the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the GENIUS Act), which created a federal framework under which both insured depository institutions and certain nonbanks may issue stablecoins (see here). The federal banking agencies are required to adopt a comprehensive regulatory framework for stablecoin issuers, including baseline requirements for capital, liquidity, reserve assets, and governance, by 18 July 2026 (see here). The EU equivalent, MiCAR has been in force for over a year and around two dozen stablecoins have been approved by EU regulators so far (see here). The UK is still in the process of formulating its regulatory regime in respect of stablecoins; responses to the BoE’s consultation are due by 10 February 2026. In Hong Kong, stablecoin issuers are regulated under the Stablecoins Ordinance, which came into force on 1 August 2025, and require a licence. Please see our blog with an overview of the Stablecoins Ordinance here.

Central bank digital currencies (CBDCs)

We are expecting further movement regarding the potential issuance of CBDCs in various regions, too. 

In 2025, the ECB decided to proceed with a Digital Euro, describing it as “an idea whose time has come” and pointing to changing payment behavior and the emerging need of strategic autonomy. Should EU lawmakers adopt the proposal in the course of 2026, the Digital Euro could be issued as soon as 2029. Pontes would also allow settlement of DLT-based securities trades via central bank money without requiring a separate wholesale CBDC. 

The Digital Pound Taskforce in the UK continues to oversee the BoE and HM Treasury during design phase for a digital pound which is expected to run throughout 2026 with a blueprint published by the end of 2026. However, as of October 2025, no decision has been made on whether to introduce a digital pound but it is clear that it will be a decision involving both the BoE and the UK Government.

In the US, the Federal Reserve has noted that it would only proceed with a CBDC pursuant to an authorising statute becoming law. In 2025, the House passed three separate bills that would prohibit the Federal Reserve from issuing a CBDC or offering products, services, or accounts to individuals (see here), although they have not progressed through the Senate. 

Inversely, China’s digital currency, e-CNY, now benefits from interest as of 1 January 2026 – becoming the world’s first interest-bearing CBDC. In Hong Kong, the HKMA will continue development of their e-HKD for both financial institutions and individuals, however have not yet reached a policy decision on whether to introduce an e-HKD.

5. When Machines Buy Things: The Rise of Agentic AI Payments 

Agentic AI, or artificial intelligence capable of autonomous decision-making, is moving rapidly from concept to commerce. Unlike traditional assistants that recommend, agentic systems act. They can negotiate and settle transactions without direct human intervention.

Payments businesses and large financial institutions are already integrating agentic AI payments. We expect this trend to accelerate over the course of 2026.

Existing payments frameworks lag behind

While the UK does not plan to introduce an overarching financial services framework for AI, the EU’s AI Act will apply to businesses operating in continental Europe once the regime is implemented in mid-2026; but agentic AI systems in the payments space are not necessarily in scope of the AI Act’s comprehensive obligations for “high risk” AI systems. 

It is less clear how payments regulation will apply to AI payments, as autonomous commerce is not envisaged by existing UK and EU payments regimes. Current frameworks were built with human actors in mind, so they assume a human initiates, authenticates and approves each payment transaction. Those same assumptions underpin the EU’s proposed payments regime, PSD3. 

When software assumes these functions instead of humans, foundational concepts may be strained. For example, what constitutes valid authorisation of payment when a consumer is absent at the moment of purchase? How is the requirement to authenticate payers (which traditionally occurs through methods such as 2-Factor-Authorisation) ensured and can payment institutions comply with their KYC obligations? These questions require urgent attention to ensure that existing consumer and other user protections work effectively. Any agentic payments which are not subject to such protections carry particularly acute risks given the increasing frequency of payments fraud globally. Firms executing payments will also need to evolve their fraud monitoring systems to not only detect suspicious human behaviour but to understand and validate the behavior of legitimate non-human agents. If an agent acts beyond its brief (e.g. purchasing the wrong item, exceeding a budget or transacting with an unauthorised merchant), or if an agentic payment is fraudulently executed, the question of who absorbs any related losses is also unresolved. 

Regulators in the UK have started to consider the impact of agentic AI on financial services more generally (as explained here). The EBA has started monitoring the use of agentic AI in the banking and payment sector (as mentioned here). It is unclear how agentic AI will be reconciled with the HKMA’s requirement that there be a “human-in-the-loop” for use of customer-facing GenAI (guidance here), although their GenAI Sandbox may prove a useful testing ground for this (discussed here). However, innovation in agentic AI payments outpaces related regulatory developments. Expect plenty of disputes to arise before frameworks evolve to appropriately address autonomous payments. 

Crypto and AI-to-AI payments

The more intriguing frontier to watch in 2026 may be AI-to-AI transactions. When autonomous agents transact at scale by paying for data or other goods and services, traditional fiat rails may prove too slow. There is a potential use case for cryptoassets here, as some of the features that can make crypto awkward for everyday human commerce – the absence of chargebacks, the irreversibility of payments and the lack of institutional intermediation – may be precisely what autonomous payments require. Stablecoins backed by fiat currencies may be particularly attractive. Regulation will, however, need to catch up if stablecoins are to be used in this context at scale and appropriate protections are likely required in order to reduce the potential risk to users.

AI-to-AI payments will likely increase in popularity as payments businesses continue to utilise agentic AI so we see this being a topic for regulatory consideration before it becomes too embedded.

Read our views on other AI developments here.

6. The Regulators Strike Back: Digital asset enforcement action 

Combatting the criminal abuse of digital assets is high up the agenda for the UK government and regulators. The FCA has reportedly built up a dedicated team for cryptoasset enforcement, HM Treasury has identified combatting such criminal abuse as part of its Economic Crime Plan 2023-2026 and, in November 2025, the National Crime Agency launched its first-ever campaign to protect the public from crypto investment fraud, highlighting the "financial and emotional loss" experienced by victims. The second half of 2025 saw several enforcement actions in the digital asset space. In July 2025, a joint operation by the FCA and Metropolitan Police raided several sites in London, seizing seven crypto ATMs and arresting two people on suspicion of operating an unregistered crypto exchange and money laundering. In September 2025, two persons were convicted under the Proceeds of Crime Act 2002 (POCA) for transferring cryptocurrency which was criminal property, leading to one of the biggest cryptocurrency seizures in the world of £5 billion. In October 2025, the FCA sued HTX for breaching the financial promotions regime. In November 2025, the Serious Fraud Office launched its first major cryptocurrency investigation into suspected fraud relating to a “crypto hedge fund”. Against this backdrop, we expect the UK authorities and regulators to use their powers more actively to crack down on fraud and money laundering in the digital assets space in 2026 and beyond. This may include deploying the cryptoasset enforcement powers introduced by the Economic Crime and Corporate Transparency Act 2023 (which we discuss here). That Act amends POCA to make it easier to search for, seize and realise cryptoassets in a wider range of circumstances, and extends those powers to additional agencies, including the FCA.

As the shape of the UK regulatory framework for cryptoassets becomes more clear, firms that operate in the UK market will need to start planning for compliance. We discuss the FCA's draft statutory instrument on the UK crypto regulatory regime in more detail here. From a disputes and regulatory perspective, three points stand out. First, cryptoasset trading platforms and intermediaries will be expected to implement systems and controls to prevent and detect market abuse, and to manage notifications of suspicious activity. Second, firms will need to consider the liability and litigation risks arising from public disclosures in admission documents and of prudential and other regulatory information, as detailed rules on these areas take shape. Third, we also await further FCA consultation in Q1 2026 on the application of the Consumer Duty and potential access to the Financial Ombudsman Service in the cryptoasset context, which could significantly reshape firms’ conduct and redress risk.

As seen in Hong Kong, non-compliance with new digital asset regimes is being closely monitored and enforced, e.g. a fine for distributing unauthorised virtual asset funds and, in response to reported virtual asset platform cybersecurity incidents, stricter best practices for virtual asset custody controls.

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#financial services #fintech #US #UK #Europe #Tokenisation #Payments #DeFi #DLT #stablecoin #CBDC #crypto #cryptoassets