UK Proposes Ownership Limits for Stablecoin Issuers in New Regulatory Draft

The UK government has unveiled a draft regulatory framework that would place strict ownership limits on stablecoin issuers and custodians, signaling its intent to tighten control over digital asset markets while promoting innovation under safer conditions.

According to the draft, no single shareholder would be permitted to hold more than 20% of a stablecoin issuer’s equity. The same rule would apply to custodians responsible for safeguarding digital assets. Regulators say this ownership cap is designed to prevent excessive concentration of power, reduce conflicts of interest, and encourage transparency in a market that has grown rapidly with little oversight.

Stablecoins, which are cryptocurrencies pegged to traditional currencies like the pound or the U.S. dollar, have become increasingly popular for payments and trading in the UK. Their stability compared to volatile digital assets like Bitcoin has made them a favored tool for remittances, merchant settlements, and decentralized finance. However, regulators worry that a lack of governance rules could expose consumers and the financial system to risks if a few individuals or companies exert too much control.

The draft framework would also require issuers to maintain full 1:1 reserves in safe, highly liquid assets such as government bonds and cash. These reserves must be held with authorized custodians, who themselves will face heightened scrutiny under the proposed law. Regulators argue that these requirements will ensure stablecoins remain fully redeemable at all times, preventing the type of liquidity crises that have plagued some high-profile crypto projects.

Reaction from the industry has been cautious. Some UK-based fintech firms welcomed the clarity, noting that strong rules could give stablecoins legitimacy in mainstream finance. They believe such regulation could help the UK position itself as a leading global hub for digital assets. However, others warned that the 20% ownership limit could discourage investment in startups by restricting venture capital firms that typically take larger stakes in early-stage companies.

Consumer advocates largely applauded the proposal, stressing that safeguards are long overdue in a sector where investors often bear the brunt of sudden collapses or mismanagement. They point to past failures in global crypto markets as evidence that unchecked stablecoin issuers pose systemic risks if allowed to grow without limits.

The government has opened a public consultation on the draft, inviting feedback from industry players, consumer groups, and financial experts. Officials expect to finalize the framework by mid-2026, with implementation beginning shortly after.

If passed, the rules would make the UK one of the first major economies to set ownership caps for stablecoin issuers. Observers say this could set a precedent for other jurisdictions grappling with how to regulate digital currencies that straddle the line between innovation and risk.

For now, the UK’s message is clear: it wants to harness the benefits of stablecoins while building robust guardrails to protect the financial system. The ownership cap proposal may spark debate, but it reflects a growing global trend of governments moving from observation to direct regulation of the crypto industry.