By Michael Mynn
Chief Advisor of FedMSB
An industry analysis for money services businesses, payment institutions, remittance/FX providers, e-money issuers, and digital-asset payment firms.
Executive Summary
Across 2025, the global MSB ecosystem crossed a threshold: it moved from a patchwork of innovation, enforcement, and platform-scale competition into a more durable phase of institutionalization—defined by legislated perimeters, standardized payment data, and tighter supervisory expectations. In the United States, the GENIUS Act (signed July 18, 2025) created a federal architecture for “payment stablecoins,” thereby integrating stablecoin issuance and use more directly into the governance logic of payments and supervisory accountability.¹ In the European Union, MiCA’s operationalization turned “compliance aspiration” into a licensing and transition timetable, with a widely cited transitional endpoint of July 1, 2026 (subject to member-state choices and early termination upon authorization/refusal).²
Meanwhile, the plumbing of payments advanced materially: the U.S. high-value wire system (Fedwire Funds) completed its migration to ISO 20022, a shift that is less about speed than about data structure, reconciliation integrity, sanctions screening, and end-to-end auditability.³ The G20/FSB cross-border payments program, despite meaningful policy work, openly confronted the likelihood that 2027 targets will be missed—reinforcing that the next phase is not slogan-driven modernization but difficult, multi-jurisdictional implementation.⁴
For 2026, the most defensible baseline is an “implementation squeeze”: regulatory deadlines (MiCA transition windows, UK safeguarding reforms), data obligations (ISO 20022 downstream effects, FATF payment transparency revisions), and governance consolidation (e.g., UK PSR integration direction) will push MSBs to operate more like regulated financial utilities than “light-licensing internet platforms.” The competitive advantage will concentrate in firms that can (i) sustain multi-rail operations with high auditability, (ii) industrialize safeguarding and reconciliation, and (iii) treat compliance not as a department but as an operating system.
I. Defining the 2025 Inflection: Institutionalization as a Market Structure Event
“Institutionalization” is not merely “more regulation.” It is a structural transition in which:
- The legal perimeter becomes explicit (statutes, licensing categories, supervisory allocation).
- The data perimeter becomes standardized (message formats, mandated transparency fields).
- The operational perimeter becomes auditable (safeguarding, reconciliations, independent assurance).
When these perimeters harden simultaneously, the industry’s economic logic changes. Compliance becomes a fixed-cost platform capability; marginal growth favors scale, repeatable governance, and a defensible control environment.
II. The Five Structural Events of 2025 (Global Lens)
1) Stablecoins migrate from “enforcement-risk” to “rule-of-law” finance
The GENIUS Act—signed July 18, 2025—is best understood as a constitutional moment for payment stablecoins in the U.S. payments architecture. By defining permissible issuance pathways and embedding stablecoins into a supervisory frame, it signals that stablecoin payment instruments are likely to be assessed against familiar criteria: reserve integrity, redemption expectations, disclosures, governance, and regulatory accountability.¹
Structural meaning for MSBs:
Stablecoins shift from “crypto settlement convenience” toward a regulated settlement rail whose viability depends on (a) auditable reserves, (b) enforceable redemption, and (c) compliance interoperability with BSA/OFAC-era expectations.
This accelerates a “two-speed” market: compliant issuers and compliant integrators (banks, payment firms, PSPs) can scale; others face rising distribution friction and counterparty risk premia.
2) Europe’s MiCA operational phase: compliance becomes a licensing tournament
ESMA’s MiCA materials clarify a central operational fact: CASPs active before 30 December 2024 may, in many cases, continue until 1 July 2026 or until authorized/refused—while member states may reduce or not apply the transition depending on local regimes.²
Structural meaning for MSBs:
Europe becomes a market where license status is the primary competitive gate.
The payoff accrues to firms that can industrialize authorization, governance, and multi-country compliance replication—while smaller firms increasingly face “exit, merge, or specialize.”
3) ISO 20022 and U.S. wire modernization: payments become structured data
The Fedwire Funds Service ISO 20022 migration is a quintessential structural event because it changes the “language” of high-value payments. In July 2025, the Federal Reserve announced completion of ISO 20022 migration for Fedwire Funds, advancing payments modernization.³
Structural meaning for MSBs:
ISO 20022 is not a formatting exercise; it is an enforcement and operations multiplier. It improves the feasibility of automated compliance checks, sanctions screening precision, exception handling, and reconciliations—while exposing firms with weak data governance.
As upstream systems standardize, pressure transmits downstream: MSBs must upgrade internal schemas, mapping logic, reconciliation tooling, and investigation workflows.
4) Cross-border payments: policy consensus meets implementation reality
In October 2025, the FSB published its consolidated progress report for 2025 under the G20 Roadmap, emphasizing implementation of agreed policy recommendations (access expansion, RTGS hours extension, ISO 20022, and linking fast payment systems). Reuters reporting on the same progress cycle underscored what practitioners already suspected: the 2027 targets are unlikely to be met on schedule. BIS analysis similarly notes modest improvements relative to targets and highlights the gap between KPI aspirations and real-world delivery.⁴
Structural meaning for MSBs:
The “cheap, instant, transparent cross-border future” is not canceled; it is delayed—and therefore commercialized through incremental, corridor-based execution and multi-rail routing rather than a single global leap.
Firms that build resilient routing, exception management, and data-driven dispute handling gain share even if macro KPIs lag.
5) AML/CFT shifts from form to function: transparency and effectiveness rise
Two FATF developments in 2025 are structurally important for MSBs:
FATF revised Recommendation 16 (Payment Transparency), explicitly aiming to increase information transparency accompanying cross-border payments and require tools to protect against fraud and error.⁵
FATF also updated its Guidance on Financial Inclusion and AML/CFT Measures in 2025, reinforcing proportionate, risk-based implementation and seeking to reduce unintended exclusion.⁶
Structural meaning for MSBs:
Compliance becomes more “outcome-based”: regulators increasingly care whether payment-chain data is usable, retained, and operationally effective—not merely collected.
Payment transparency obligations will interact with ISO 20022 adoption, effectively converging the data and AML agendas into a single operational challenge.
III. 2025’s One-Word Summary: Institutionalization
Institutionalization captures the year’s common direction: new monetary instruments (stablecoins), new interfaces (open banking/data rights), and new rails (ISO 20022, fast-payment interlinking) are being pushed into standardized, licensed, governable, and auditable regimes.
IV. Why 2026 Is the “Implementation Squeeze”
The squeeze emerges when multiple calendars and control expectations overlap.
A. Europe: MiCA transition windows converge on a licensing cliff
ESMA’s articulation of transitional measures makes 2026 a sorting mechanism: authorization success determines survival and scaling, while non-authorized providers face exit or restructuring.²
B. United Kingdom: safeguarding becomes a hard operational constraint
The FCA’s safeguarding reforms for payments and e-money firms are widely tracked as coming into force on May 7, 2026, raising expectations for reconciliations, reporting, governance, and audit readiness.⁷
This is not merely “compliance cost”; it is a balance-sheet-adjacent control regime for customer funds that changes business models, partner diligence, and operational design.
C. United States: open banking (Section 1033) moves toward “contested implementation”
The CFPB’s October 2024 personal financial data rights rule originally set phased compliance beginning April 1, 2026, but 2025 delivered litigation, reconsideration, and—critically—a court-ordered stay/temporary block affecting compliance deadlines while the CFPB undertakes further rulemaking.⁸ Late 2025 reporting further indicates the CFPB planned an “interim final rule” approach amid resource and governance constraints.⁹
Implication: data-sharing will continue commercially, but the regulatory settlement may remain fragmented—raising contracting complexity and liability negotiation costs for MSBs embedded in data-driven onboarding, underwriting, or payment initiation.
D. Payment interoperability moves from blueprint to corridor delivery
BIS Project Nexus, following its comprehensive blueprint and continued multi-stakeholder work, frames the interlinking of domestic instant payment systems as a plausible path to near-real-time cross-border transfers in many cases, while acknowledging the multi-stakeholder complexity of live implementation.¹⁰
This supports a 2026 expectation of selective corridor progress rather than universal interoperability.
E. Governance consolidation tightens the supervisory interface
In the UK, the decision to abolish the Payment Systems Regulator and absorb its duties into the FCA was reported in March 2025 and framed as a move toward reducing overlap and creating a more unified regulatory touchpoint.¹¹
Even if institutional integration is gradual, the direction is clear: fewer gaps, fewer “forum-shopping” strategies, more consistent supervisory expectations.
V. 2026–2027 Outlook: Scenarios and Strategic Implications
Baseline (most likely): regulated scalability beats growth-at-all-costs
MiCA transition pressure + UK safeguarding enforcement drive consolidation and specialization.
Cross-border KPI targets remain challenging; competition shifts toward reliability, transparency, and exception-handling excellence rather than headline FX pricing.⁴
Stablecoins expand primarily as institutional settlement tooling under tighter governance expectations, with broader retail penetration dependent on supervisory comfort and distribution partnerships.¹
Upside: interoperable instant payment corridors mature faster than expected
If Nexus-linked or analogous schemes progress into credible commercial corridors—and regulators harmonize operational requirements—cross-border cost and speed could improve materially in certain regions, rewarding infrastructure-grade MSBs.¹⁰
Downside: U.S. data-rights uncertainty and global fragmentation raise fixed costs
If 1033 remains stuck in litigation/rewrite cycles and global AML/data expectations intensify unevenly, mid-sized MSBs can get trapped: rising compliance fixed costs without matching scale benefits.⁸`⁹
VI. What “Winning” Looks Like for MSBs in 2026
In institutionalized markets, operational excellence and governance become commercial strategy. Concretely:
- Treat safeguarding, reconciliation, and audit evidence as product features
UK reforms are a preview of where many jurisdictions are heading: daily or high-frequency controls, clear books-and-records, and independent assurance.⁷ - Build a compliance data architecture that assumes ISO 20022 and FATF transparency convergence
ISO 20022 structured messaging plus FATF’s revised payment transparency expectations create a single practical requirement: high-integrity payment data that remains consistent across the chain, supports screening, and is explainable in investigations.³`⁵ - Adopt multi-rail routing with disciplined failure governance
The economic frontier is no longer “connect more rails.” It is: route optimally under risk constraints, recover gracefully from failures, and prove control effectiveness under audit and supervisory review—especially as cross-border targets remain difficult.⁴ - Plan for open banking as a contracting and liability regime, not a free API dividend
With 1033 timelines stayed and rewritten, firms should assume a prolonged period where market practice (contracts, aggregators, bilateral standards) leads regulation. Legal risk and allocation of breach responsibility become material.⁸`⁹
Conclusion
2025 did not merely add rules; it redefined the type of industry MSBs inhabit. When stablecoins receive statutory architecture, when payment messaging becomes structured and standardized, when AML expectations move toward effectiveness and transparency, and when supervisory interfaces consolidate, the sector starts to resemble a regulated utility layer for commerce.
2025 keyword: Institutionalization.
2026 thesis: Implementation Squeeze—the year the new perimeters become operational constraints, and operational constraints become competitive outcomes.
Footnotes (Sources)
- White House Fact Sheet and related materials on signing and framework of the GENIUS Act (July 18, 2025).
- ESMA statements/materials on MiCA transitional measures and the July 1, 2026 endpoint subject to member-state choices and authorization/refusal outcomes.
- Federal Reserve Bank Services announcement on Fedwire Funds ISO 20022 migration completion (July 2025).
- FSB consolidated progress reporting under the G20 cross-border payments roadmap; Reuters/BIS analysis on target slippage and implementation gaps.
- FATF update revising Recommendation 16 on payment transparency (June 2025).
- FATF 2025 updated guidance on financial inclusion and AML/CFT measures.
- FCA policy statement on safeguarding reforms and May 7, 2026 effective date.
- CFPB personal financial data rights (Section 1033) rule and subsequent court stay/block affecting compliance deadlines.
- Reuters reporting indicating CFPB planned an “interim final rule” approach amid constraints.
- BIS Project Nexus materials (blueprint and ongoing work) on interlinking instant payment systems for cross-border transfers.
- Reuters reporting on UK decision to abolish PSR and absorb duties into FCA (March 2025).