The Implications of ‘Mastercard v PSR’ upon Legal Tech, Crypto, and Regulatory Power
Author: Tahrimah Faruque
A recent High Court decision in Mastercard Europe SA v Payment Systems Regulator might look, at first glance, like a narrow public law dispute about interchange fees. In reality, it does something much bigger: it redraws how far regulators can go when intervening in complex financial infrastructure - and why system design, not just compliance, is now a frontline legal risk.
For anyone working at the intersection of payments, fintech, blockchain, or legal tech, this judgment is worth paying attention to.
The Case in Brief
Mastercard Europe SA, alongside Visa Europe and Revolut recently entered into a judicial review challenging the statutory authority of the Payment Systems Regulator (PSR).
The core question was deceptively simple:
Does the PSR have the power under section 54 of the Financial Services (Banking Reform) Act 2013 to issue a general direction that effectively caps default interchange fees on certain cross-border card transactions?
This wasn’t about whether a cap was economically sensible — only whether the regulator had the legal power to do it at all.
Why Interchange Fees Matter
Interchange fees are paid by a merchant’s bank (the acquirer) to the cardholder’s bank (the issuer) whenever a card payment is made.
Post-Brexit, a regulatory gap emerged:
Domestic and intra-EEA (i.e. within the European Economic Area) fees were capped
But cross-border transactions where UK merchants accepted EEA-issued cards were not
Interchange fees work like tolls baked into payment infrastructure — Brexit removed the toll cap on one cross-border route, allowing costs to rise invisibly for UK businesses. Now, a regulator (PSR) has proposed intervening to cap those fees, even though the precise cap level and timing are not yet finalised.
Mastercard’s Legal Challenge
Mastercard advanced two main statutory arguments:
1. No Price-Capping Power Under Section 54
While section 54 allows the PSR to issue directions, they argued it does not expressly grant price-setting or price-capping powers. Traditionally, Parliament confers such powers explicitly (for example, through competition law or tariff-setting regimes) not via broadly framed directions.
The High Court rejected this argument, holding that Parliament intentionally gave the PSR flexible tools to respond to evolving payment markets. There is no rule, the court said, that regulatory intervention must be confined to competition law alone.
2. Section 108 as a Restriction
Mastercard also argued that section 108 of the Act, read with the Payment Services Regulations 2017, restricted the PSR where conduct was already governed by another regulatory regime.
Again, the court disagreed. Section 108 was designed to prevent conflicting regulation, not overlapping objectives.
The Outcome — and What It Didn’t Decide
The High Court dismissed the challenge, confirming that:
The PSR does have authority under section 54 to impose price caps via general directions;
Section 54 is not limited to “conventional” regulatory directions;
Section 108 does not prevent this form of intervention.
Crucially, during judicial review, the court did not rule on whether price caps are economically justified. This was purely about can the PSR do this?, not should it?
What Happens Next?
Mastercard now has several strategic paths open, and we’re yet to see where this will go. It could be one of the following:
Appeal to the Court of Appeal
The case turns on statutory interpretation with sector-wide consequences. Whether broadly drafted regulatory “directions” can operate as de facto price controls is an arguable point of law of general public importance.Shift from Legality to Constraint
Even without overturning the ruling, future battles can focus on:Limiting the scope and duration of any cap
Challenging methodology, proportionality, or consultation flaws
Contesting economic assumptions underpinning regulatory action
Why This Matters for Blockchain, Crypto and financial regulation.
As it stands, this judgment quietly lowers the threshold for functional regulation.
Regulators no longer need to label something a “price control” if they can characterise intervention as:
Promoting competition
Protecting users
Correcting market distortions
That logic translates cleanly into crypto and stablecoins.
Interchange fees and stablecoins look different, but regulators see similar dynamics:
A private actor embeds fees into infrastructure
Those fees scale invisibly across millions of transactions
End users have little bargaining power
In crypto, that “fee” might be:
Issuance or redemption spreads
Reserve yield capture
Validator or sequencer fees
Protocol-embedded tolls
The lesson? Pricing baked into code is no longer legally neutral design.
The Quiet Governance Problem
The judgment confirms regulators can impose ex post economic constraints, even where statutes don’t spell out price controls explicitly.
Applied to blockchain:
If a stablecoin functions as payment infrastructure, regulators will expect the power to intervene after deployment
“The code won’t let us” is no longer a defence courts are likely to accept
For protocols that rely on ex ante certainty — smart-contract-locked fee structures, mint/burn mechanics, or reserve rules — governance is no longer just a technical choice. It’s a regulatory one.
Broader Signals from Financial Regulation
This trend isn’t isolated.
German regulator BaFin has issued guidance under the EU’s Digital Operational Resilience Act (DORA), making clear that AI systems — including generative AI and LLMs — must be treated as core ICT infrastructure, not experimental tools.
Taken together:
The PSR can reshape pricing economics through broad statutory powers
BaFin expects AI and digital systems to be governed upstream, at design stage
Regulators are moving earlier in the value chain — from policing outcomes to shaping systems.
What This Means for Clients (and Legal Tech)
For payments, fintech, and crypto clients, this case reinforces a new reality:
Regulatory risk lives in architecture, not just compliance
Fee design, governance models, and technical constraints are now legal strategy questions
That convergence is exactly where legal tech, regulatory design, and future-facing legal practice collide.
For our Legal Tech Society, the takeaway is clear:
The future of regulation won’t just be written in statutes or guidance notes. It will be enforced through how systems are built — and courts are increasingly comfortable letting regulators reach into that design layer.
