On 25 March 2026, Agant’s Chief Legal Officer, Tom Rhodes, gave evidence to the House of Lords Financial Services Regulation Committee as part of its inquiry into the growth and proposed regulation of stablecoins in the UK. The session is available on the UK Parliament website, and a recording is embedded below. This blog post presents a few highlights from the session.

Oral evidence: Growth and proposed regulation of stablecoins in the UK

Introduction to Agant and stablecoins

Who is Agant?

The Chair: I understand that Agant is a start-up. Could you give us a brief overview of Agant, how long it has been going, what it is planning to do, how many people it has, and so on?

Tom Rhodes: Yes. It is a start-up, I suppose, still. It is a couple of years old. It is a stablecoin issuer. The bare business model is to receive payments from users, distributors, and convert that into stablecoins and place the underlying money that we have received into safe assets, gilts or bank deposits, and then distribute the stablecoin out to users who will use it independently of us. That is, essentially, the business model. The source of income is the return on the backing assets, whatever is paid on the short-term government debt or the bank deposits.

We are a couple of years old. We have nine people now. We are registered with the FCA. In the UK, to conduct crypto asset business, you have to be registered with the FCA under the money laundering regulations. As you are well aware, no dedicated crypto asset or stablecoin issuance regulatory regime is in force at the moment. It is coming in October 2027. The regulatory permission that you need is to be on the register of crypto asset businesses under the money laundering regulations. That registration we received about a month ago, after a thorough eight-month assessment process looking at our systems and controls by the FCA. We are now registered and there are no regulatory barriers to launching. We have several customers signed up. We are dotting the Is and crossing the Ts and will be launching shortly.

What is a stablecoin?

The Chair: Not too much detail. Keep it brief, because we have a lot of people who want to ask questions.

Tom Rhodes: Okay, understood. I will start with blockchains. You will have heard about blockchains. They are just a ledger, a chain of blocks of information. The information is assets, activity using those assets, transfers of the assets. This chain of information, which is referred to as a ledger, is controlled by consensus among the participants. It is updated through a consensus mechanism. It is publicly accessible and it is global. An imperfect but helpful analogy is the internet. Stablecoins are created and recorded on the blockchain. They are an asset. They are a token or a piece of information on the blockchain that can be owned and transferred. They have a distribution structure similar to physical cash. They are often referred to as digital cash. That means that they are issued by an issuer, distributed by a small number of distributors who have a direct relationship with the issuer, and then the distributors transfer the stablecoins to end users who use them independently of the issuer, similarly to how the Bank of England creates physical cash and distributes it via a small number of distributors, and it then is used in the economy by people who have no relationship with the Bank of England whatsoever. It is transferable by updating the blockchain. It does not matter who the counterparties are, wherever they are in the world; you just update the blockchain and that is the transfer.

There are ways in and out of stablecoins and back into fiat money, bank money, which would be redemption if you are one of the distributors who has that relationship with the issuer, or conversion using a distributor if you are an end user who does not have that relationship with the issuer.

The simplicity of it-the fact that you are working on this simple ledger that is a bare building block-enables composability and programmability, rather than having to conform to the multi-layered payment systems and infrastructure that you use today for transferring assets, whether it is payments, bank deposits, stocks and shares, or other financial instruments. That simplicity and those bare building blocks are what give people the ability to innovate.

As the committee will be aware, this is something that financial institutions are adopting, and the UK has a significant opportunity to make use of it and to have its financial institutions make use of it.

Redemption rights

Redemption rights against the issuer/Risks of universal redemption

Lord Sharkey: Quickly, about redemption rights, I was asking your views about the proposed rules.

Tom Rhodes: Both the FCA and the Bank of England have stated that redemption rights need to be universal to all holders. Every holder should have the right to go to the issuer to redeem the stablecoin. I have a lot to say about that.

The first point is that that is not how any of the well-established stablecoins work. I know you have had evidence from Circle. Tether is the other big stablecoin issuer. The percentage of holders of USDT and USDC that have that direct redemption right is a fraction of 1%. Tether released a regulatory publication in February, where it said it has just over 800 direct customers. USDT, Tether’s stablecoin, is issued in the hundreds of billions. It is up at about $190 billion. It estimates that it has 300 million or 400 million individual users, but only 800 have direct redemption rights. Yet the stablecoin remains extremely stable on secondary markets because the distribution structure and the ecosystem works, and they ensure it does.

The proposals from the regulators are that the end users, whoever they are, wherever they are in the world, should have the right to go straight to the issuer and redeem that stablecoin, whether it is for just £1 or not. Clearly, it is a different product to how it works, but it means that the issuer is potentially subject to an enormous onboarding and customer due diligence process. It would have to receive the request for as little as £1, go through the process of onboarding, doing customer due diligence, checking the documents from wherever that person is in the world, and then set up a payment chain. It would then have to set up bank details and bank payments to get the £1 back to them in fiat, in bank money.

The details are not decided yet, but that is all to be done, in theory, on demand once KYC has been done. That means that, again, if you take the stats from Tether-and Circle is similar-it could face hundreds of millions, in theory, of KYC processes in a relatively short space of time.

The fact is, as we see it, that giving users that right or the belief that they have that ability to get out by going back to the issuer is likely to increase risk because the issuer then has the potential for a bank run-like redemption period of high-stress redemptions. In reality, there will be a KYC process, but they may have to then redeem for everybody in a short space of time.

That risk is mitigated by the existing structure that stablecoins operate under at the moment, because those end users have to go to their conversion providers or the distributors in the secondary market, so it is spread. The risk is diversified across multiple parties in the distribution chain rather than being entirely placed on the issuer.

Why stablecoins? Speed, efficiency, programmability, and composability

Use cases: payments, capital markets, investment banking and asset management

Target market

The Chair: How big a market will be addressable? Within that, will you specialise in particular areas or do you have target customers?

Tom Rhodes: Yes, we are targeting institutional use cases, so all those City activities that I mentioned. There are a few obvious ones. Asset managers who are tokenising their products, whether it is stocks and shares, trading or investment funds and money market funds, are showing a lot of interest. If they can create a token and people can go in and out of them more easily, you can potentially expand the market for them. The settlement asset for buying into those products would be a stablecoin if you want to take advantage of the benefits. That is where we are positioning ourselves, to work with the institutional investment firms, institutional banks.

There is also the more well-known use cases of cross-border payments. Blockchain is a global network, so you can easily update the network to transfer ownership from A to B, wherever B is in the world. We see a lot of interest as well from more simple payment services providers, whether it is remittance across borders, or corporate treasurers who have international business activities and are looking at paying suppliers or receiving purchase payments from customers anywhere in the world. That is potentially streamlined and costs are cut if they can use stablecoins as well.

How do issuers compete?

Networks, integrations, stability, technology, and reputation

Lord Griffiths of Fforestfach: As a final question, you are entering the market and others are entering the market. You are in a market where your potential clients have a reduction in cost. That is why they are interested in being in dialogue with you and so on. The problem is that, if then a lot of people like you in competition in this market are restricted in what you can invest in, in a competitive structure you would expect to see other forms of competition emerging, which would effectively reduce price or give you an advantage over others. Do you see that developing? If so, what could you do about it? Would the regulators put in some particular regulation or series of regulations that would make it impossible to compete against each other, even though the returns were limited on the backing assets?

Tom Rhodes: Maybe I can just speak broadly about competition. Do you mean competition between stablecoin issuers?

Lord Griffiths of Fforestfach: Yes.

Tom Rhodes: You would compete as a stablecoin issuer by developing those networks and developing use cases. For example, I mentioned earlier people who are looking to get into money market funds. If you can re-register the backing asset, which is a money market fund from us when we do not need the stablecoin any longer and we do not need the backing asset any longer because somebody has redeemed it with us, that backing asset can be immediately reregistered to a customer. If you can streamline those types of activities, if you have better technology, and if you have better disclosure and a better reputation, you compete there. There is another area that is probably worth mentioning. To ensure the functioning of the ecosystem through distribution, you need to incentivise your distributors. As I say, if it is Revolut and you are saying you need to make a one-for-one conversion service for customers so that they can buy and sell our stablecoin, we will issue the stablecoin to you and redeem to you but we will also give you rebates or we will share revenue with you to incentivise the distributors to make those markets to provide that distribution service. You also compete there. But the fundamental business model is extremely simple.

Stablecoin safety

Backing assets

Lord Griffiths of Fforestfach: We want to avoid at all costs having a financial crash because of it. What one thing would you need to put in to prevent that happening and let the experimentation carry on at the same time?

Tom Rhodes: The most important aspect of the issuer’s business model is the backing asset arrangement and the integrity of the backing assets. They need to be high-quality, highly liquid assets. These will be low return but stable assets.

The regulators have broadly got that right. We have no concerns with the FCA’s proposals on the composition of the backing assets. We will back our stablecoin with short-term government debt of no longer than a three-month maturity, and then bank deposits and money market funds that hold that type of asset. That is crucial for the redemption, which has to go to distributors to ensure that the ecosystem works and that the stablecoin can be converted when it needs to be.

Redemption mechanisms in the event of a run

Stablecoin conversion: are stablecoins illiquid?

Holding limits

Unenforceable?

Lord Sharkey: Could I ask you for your views on the Bank of England’s proposed regulations, in particular the rules for backing assets, redemption rates and holding limits? Perhaps I can start with holding limits. You say in your written evidence, “Given the limited jurisdiction the Bank has over global blockchain networks and wallet providers, there is no way a holding limit could be effectively enforced. The issuer cannot track ownership or identify when the same person sits behind multiple wallets, because it does not have a direct relationship with all end holders.”

Tom Rhodes: Yes. That last point is about enforceability. I can start with that. As I mentioned and I wanted to cover in the opening statement, the blockchain is essentially a ledger. It is globally accessible. To access that, you set up a wallet. The wallet is essentially like an address. It is participation. It is almost like adding your name to the blockchain and being able to participate. It is a string of numbers. It is like the IP address to participate. That is straightforward to do. You can do it yourself and you can hold all the keys and the control to that yourself, or you can use a wallet provider, which will provide a custodial service and will help you manage the keys and provide custodial control over any assets that are in your wallet. That is how you access the blockchain.

That is done already all over the world, and it is straightforward. The fact that it is straightforward is part of the benefits because you can build your sophisticated financial services. Whether you are a treasurer or an investment firm, you can build programmability and sophisticated conditional services, payment services, trading services, by moving assets between wallets. You can set up wallets as you need to. They are a simple concept that you can build technology on. That is part and parcel of how global public blockchains work.

However, because it is so easy to access and to set up those wallets-and a lot of people are doing a lot of thinking about this-there seems to be no clear way to control what an individual has done in setting up wallets and accessing the assets. If somebody is getting near their £20,000 holding limit, it is hard to see what stops an individual from setting up a new wallet-which with the technology they can do themselves if they are technologically sophisticated enough, or through a provider anywhere in the world-and adding stablecoin into that wallet.

The burden, therefore, potentially falls on the issuer or some other third party that would track the transfers of these stablecoins and try to identify and attribute wallets to the holder and work out which wallets are attributable to which particular holder and how much is in them. I am not aware that anybody has a solution for doing that because setting up the wallet is a relatively anonymous process in the same way that you get an IP address. You do not have to KYC with somebody. It is just technology.

Holding limits would increase stability risk, not decrease it

Lord Sharkey: The blockchain itself facilitates exactly what you have described. I discovered recently that the blockchain is inhabited by whales, and an increasing number of these whales are able to move markets because of their size. There is no limit on what they hold at all.

Tom Rhodes: Yes, you are probably thinking of Bitcoin holders. There is not intended to be any limits in the same way as there are no limits on how much cash and assets other businesses can hold.

It leads to the point that we have been trying to make, which is that introducing limits on stablecoins is counterproductive in that it would increase financial stability risk. The reason for that is that the distribution structure, which I covered briefly in the opening remarks, has a secondary market through which the stablecoin is distributed. The issuer issues to a small number. It could be asset managers, exchanges or brokers. Increasingly, people like Revolut would then offer conversion or access to their customers. Revolut is doing that in Europe already.

That secondary market needs to be fluid. If the asset manager or Revolut is seeing more demand for the stablecoin from its customers-say there is a big increase in demand as the asset manager releases a new tokenised fund-the asset manager needs to be able to bulk buy the stablecoin from the issuer and then distribute it so that people can make use of the on-chain trading that they are looking to do. If they cannot do that because either they have hit a holding limit or the distributor or their customer has hit a holding limit, the ability to access that stablecoin, to be able to make the market, to be able to buy into these products or sell these products in exchange for the stablecoin breaks down. It gets in the way of it.

For example, if a buyer of a tokenised money market fund wants to invest another £10 million in BP or Shell, or a corporate treasurer who sits on a lot of money wants to invest a lot of cash into a money market fund for a short period of time and needs to use a stablecoin to be able to do that, with the efficiencies in using stablecoins, they will need to get access to that stablecoin. If they have hit a limit or if the asset manager who would provide it has hit a limit, either they will source that stablecoin from a different provider and potentially, depending on how important and urgent the business is, they are potentially going to bid up the price slightly on a secondary market, which can happen, which pushes the peg above one for one. Alternatively, they will say, “The stablecoin is hitting limits. We need to find an alternative. We will use USDC or we will use Circle’s GBP stablecoin that it issues from offshore and we will not have these problems.”

Custody

Self-custody and KYC

Lord Sharkey: No KYC is involved at this point?

Tom Rhodes: For a self-custody, self-hosted wallet, there would not necessarily be any KYC. Yes, that is right. It is like accessing the internet. That does not mean no KYC at all. When financial institutions onboard a customer to provide the sophisticated services that I am saying people might want to do, at that point there will be KYC.

The pinch points at which KYC would be required might look similar to financial services at the moment. When you interact with certain types of services, you have to do KYC, particularly with cash. There is no KYC for holding cash or buying a wallet, but in the interactions with your bank to deposit or withdraw using your card, KYC processes are built in. There would be pinch points at which you would do it for certain financial services in the UK.

The accessibility of the blockchain, which is its strength, means that wallets and access to it will not be able to be restricted through KYC. Enforceability is a massive challenge.

Is self-custody banned in the UK? A correction to the Bank of England’s evidence

The above intervention from the Chair refers to a correction to the following evidence from the Bank of England: “Sarah Breeden: There is this concept of an unhosted wallet where you do not have a wallet provider, a regulated entity that ensures that AML and KYC criteria are complied with. Unhosted wallets will not be permissible in the UK”. For a few weeks it seemed the BOE was considering another somewhat heavy-handed intervention (along the lines of holding limits, unremunerated backing assets, banning public blockchains, and banning banks from issuing stablecoins). Fortunately the Bank has issued a correction. The correction seems to suggest an unhosted wallet (aka self custody) is fine if it complies with AML rules. This means self custody will be possible in the UK, as there is nothing banning it under current law. As HMT rightly noted in 2022, “The government does not agree that unhosted wallet transactions should automatically be viewed as higher risk; many persons who hold cryptoassets for legitimate purposes use unhosted wallets due to their customisability and potential security advantages (e.g. cold wallet storage)” (HM Treasury, Amendments to the MLRs 2017 - Response to the Consultation, June 2022, para 6.21). As such, there is no requirement for providers of self-custody wallets to register as cryptoasset businesses under the MLRs (see JMLSG Part II, Chapter 22, para 22.16). In any case, financial crime is an FCA mandate not a BOE mandate.

The regulatory approach

Call for principles-based regulation

Lord Griffiths of Fforestfach: We have taken evidence that the regulatory authorities in this country are rather more conservative-indeed, some would say, and you in evidence said, that they were unduly restrictive-compared to regulatory authorities in Europe or in the US. The question I come back to my own mind is what our vision should be going forward, say, five, 10 or 15 years as to the potential of stablecoins, fintech, tokenised deposits and so on. Is the sweep of technology such that in the world as a whole, this is happening and the UK seemingly will be dragged along, or is the UK correct that we should be cautious about it, make sure KYC is right, and all of that? I would like to get how you see, in a way, the balance or the choice.

Tom Rhodes: Our view is that the right balance at this stage of the market would have been to take a less prescriptive and less comprehensive approach to developing regulation so that the innovation, experimentation and early-stage adoption can happen and the business models can be tested and tried while they are still developing. Nobody knows still at this stage how stablecoins can be integrated usefully into capital markets and complex financial services.

There is a lot of potential, but weekly we have meetings with senior executive teams at well-known financial institutions, and they seem to always end up with an agreement to do a proof of concept. People are not necessarily ready yet. Everybody is still working this out, but there is a lot of hesitation to adopt it or even do serious testing and experimentation because of regulatory barriers, which I can come on to.

The broader point is that it would make sense at this stage to have a principles-based regulatory environment that focuses on the critical aspects of making these products safe-backing assets, the distribution structure, the redemption access, disclosure and public information about how these products work. But let people develop the business models, whether it’s who exactly has redemption rights, what the fees are, the capital structure potentially.

At this early stage, while adoption is not high and will not happen rapidly, it is hard enough to get people to think seriously about doing this. The UK already has a lot of successful and efficient financial services, for example. There will not be a rapid, precipitous deposit flight into stablecoins any time soon. This is the right time to take a principles-based approach and let people develop these products and services and work them out.

Get in touch to discuss GBP stablecoins

Tom Rhodes: [email protected]

Andrew MacKenzie: [email protected]