On The Brink with Castle Island - Andrew MacKenzie (Agant) on British Pound Stablecoins (EP.626)

Episode Date: May 21, 2025

Wyatt sits down with Andrew MacKenzie, founder of Agant, the issuer of GBPA, a pound sterling stablecoin. In this episode:  The potential emergence of non-USD stablecoins The prospect of a GBP-backed stablecoin The British crypto regulatory environment How global financial institutions are positioning around stablecoins

This is Wyatt, and on today's episode, I was joined by Andrew McKenzie, founder of A Gaunt. A gaunt is building a GB stable coin with aspirations to branch into other adjacent products. I hope you enjoy our conversation. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement

to make a particular investment or follow a particular strategy, but only a an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing.

You print a couple trillion dollars and all of a sudden, people start to worry. So out of this worry, we have something called a Bitcoin. Andy, founder of Agaunt, thanks for joining us today. Pleasure to be here. Thanks for having me. I have to check. You might be our first Scottish guest we've ever had on the brink. Maybe.

I know Nick obviously spent some time up in Scotland, so I guess you can maybe claim a little bit of time up here. But yeah, I just need to remember to speak slowly and clearly, as my mom always tells me. Yeah, exactly. He gets partial credit, maybe. Are you Liverpool fan? I try to stay impartial, so my dad and I, we support Leach United. Nice. So a good season there, too. Exactly.

Would love a personal background. Tell us who you are, why you're here. We'd love to hear about how you're involved in the crypto space. I guess my background's maybe not quite the same as a lot of founders in the space. I'm from an agricultural background. I grew up in the country, just north of Edinburgh. I spent most of my childhood in and around farming, end up studying, business and our culture at university and then kind of just fell into my first job which was working

for a large veg company up in Scotland, a grower, manufacturer and distributor and worked on an OTC desk for them, buying and selling carrots and other soft vegetables like broccoli and Brussels sprouts, you know, importing and exporting them in the UK. So maybe a little bit of an unconventional trading to start a career, but certainly one that I really enjoyed. It really opens your eyes up to what drives markets. Do those trade on an exchange or over the phone or how's that happening? Purely over the phone. A lot of wheeling and dealing, so to speak. There's a few markets that you can arbitrage quite nicely. So yeah, it's just a really interesting start to my sort of finance career, so to speak, in terms of what drives markets and what fueled the price action that we

used to see. I didn't really get into blockchain, digital assets, crypto, whatever we call it these days until 2020. When the price of Bitcoin and Ethereum disintegrated, my interest spiked and then got hugely into Defy in 2021, worked for a firm that unfortunately became a victim of FTX saga, so came out of the space and ended up going back into traditional finance and worked for a firm removing funds cross-border for agricultural businesses. So worked in the payment space for them, helping them manage the risk and also remit funds. And I guess I very quickly he realized that there's a really effective and efficient way of moving value, and that is this thing called the blockchain.

And that's really what sort of fueled the start of what is now, AGANN. What prompted AGant and what is it today? AGant is primarily a UK domiciled, stable coin issuance and infrastructure provider. We kicked things off 14 months ago now in January of last year. I guess it kind of was a combination of reasons, you know. So the UK as a financial centre globally stands out, you know, British pound sterling is the fourth largest currency in circulation and the fourth most traded UK financial services in London and also across the UK have a global presence. But there are no pound sterling on chain. There's no GDP on chain.

And so I always felt like there was a need and it was an obvious thing to do. And then in November of 2023, when I was still working in payments for ag businesses, Like I said, there was a much more efficient and effective way of remitting these funds. And then I guess what came in at that time was Bankingland and FCA published the discussion papers into their use of stable coins in both retail and systemic payment systems in the UK. I guess for me that was sort of the first catalyst to sort of starting what is now again. The regulators were ready to have the conversation. You know, a lot of my experience in digital assets and in crypto, you know, weren't maybe the best.

I was subject to a lot of grifts and stuff like that. I guess everyone kind of was in Defy. And so I really wanted to try and create something that was doing things the right way when it comes to compliance and the way in which the business governs itself and its ethos. That's really what we set off on. So I was involved in a couple of side projects with some friends and we were on calls some lawyers and I just pitched the question to them and said, what's your views on our UK Domino'sel, UK regulated, privately issued stable coin.

GPP stable coin, to be clear. GPP stable coin. We really tried to set out in creating what we kind of call the most boring kind of stable coin because we feel if there's going to be a successful UK GDPP ecosystem on chain, we need to have this foundation layer that doesn't do very much, that everyone can trust that is transparent, secure and untrusted. What's the current state of USD stablecoin adoption in the UK? It's quite high.

We don't really have any other choice. The figures aren't the most accurate at the moment. but somewhere between 5 and 7 million people own crypto in the UK. And most of them hold, it varies depending on what their total holding value is, but most of them hold somewhere between 9 and 25% of those funds in staples. So virtually all of them are in USD at present. And from your perspective, today there being no alternative. You guys are attempting to build the GPP stable coin.

Are they owning USD because they're trapped into doing so or by choice? I think it's a combination of things. We've always viewed the crypto ecosystem as dollars. And I don't really think that that's actually going to change in the short to medium term. That's where most of the liquidity is and it's where most of the liquidity will continue to be, you know, particularly in defy. Where we've made a differentiation and it's quite pedantic, but we very much view ourselves as a fintech that integrates and utilizes blockchain technology

as opposed to a crypto business. that's where we see the real value in non-US dollar stable coins. It's not necessarily directly providing liquidity against the majors. Yes, that might be a part of our business and other UK GDP issuers businesses as well. However, you know, attacking the wider UK financial services ecosystem, helping to solve a few use cases or problems for those organisations is where we see the real growth in our proposition. And those problems you're mentioning, are those highlighted by the rise of crypto and adoption elsewhere?

Are the UK financial institutions going to have problems because of crypto adoption? Or is it traditional legacy problems unrelated to crypto that you guys are looking to solve? I think it's a combination of things. I think we've put up with a number of underlying problems for quite a period of time because as far as the industry was concerned, there wasn't really a particularly suitable alternative that had the network effects that, for example, crypto has. A lot of firms got very good at putting plasters on old infrastructure and tying it together with credit lines.

They found ways around the settlement delays, etc. But, you know, that's reflected into the counterparty risk that they may need to carry or the amount of regulatory capital that they need to hold to offset those issues. I guess to tie it back, Nick Van Neck always says that, you know, if you look at fintech for the last 15, 20 years, the front end of the UI, the UX, all of that has seen massive innovation, whereas the back end hasn't. Whereas what we feel that both crypto blockchain technology and stable coins present is that back end infrastructure layer coming up to match the front end that we currently have.

We've built this multi-layer convoluted system and the hope is that you'll be able to settle collateral instantly, especially when you're doing this cross-currency. I can't wait until FX, hopefully moves on chain. What kind of inbound are you guys getting who's interested to use this product? This time last year, we felt like we needed to be a retail-focused organization. We always felt like the institutions weren't necessarily going to be ready. I remember going to the Digital Asset Summit in London in March last year, and I think the theme at that point was the institutions are coming. And that's kind of what we felt.

A summer of last year, we kind of turned that on its head. And it was probably thanks to a couple of the advisors that we brought in. And they said, you know, really, the institutions are ready and being institutional first is really the avenue that you should pursue. Originally, our focus is very much within sort of the crypto industry, so to speak, in terms of, you know, what we were trying to speak to exchanges and market makers and OTC desk, you know, everyone that had direct exposure to crypto. And then in the autumn of last year, a couple of asset managers started to poke their head up. And that's where things really started to get interesting because we kind of knew that they were sort of dabbling, but we kind of knew that they were sort of dabbling, but we, didn't necessarily know how progressed they were in their own ideology and thinking in terms of what they want to do for their own organisations, but also how ready they were to start

those conversations. So now, I would almost say there's been more that's happened since the start of the year than happened in all of last year. Now, you know, our conversations are across, you know, banks, hedge funds, asset managers, payment service providers, electronic money institutions, there's a whole spread. At that point, this time last year, we felt that stable coins were really trying to solve problems within crypto, facing off against digital assets, or like you say, maybe on the FX piece, because we kind of just viewed traditional financial payment systems, particularly domestic ones, and internal to the UK especially, as being solved. But what's become really apparent is if I was to send money via faster payments, for example,

to you in the UK, you know, it's free for me to do that. But, But if you're the infrastructure provider behind that, if you're the institution that's providing that service, it's definitely not free. And so there's a real opportunity as a stablecoin issuer where you can turn something that is currently a cost to that business into something that is a net contributor, you know, a revenue generator to that business. We're seeing a lot of interest, particularly in the inner end bound around that side, how businesses are able to become a lot more competitive in some of their product offerings

that they currently aren't able to really compete on. And I imagine if you're a centralized exchange in the U.S., you deal with U.S.D. Stable Coins operationally, and then users are off-ramping into U.S.D. accounts, that's relatively simple. But if you're a U.K. Exchange today and users are holding deposits on the exchange at U.S.D. stables, and you have to manage that off-ramp function and vice versa to GVP, either the exchange or an on-ramp off-ramp provider is taking FX risk because you don't have that instant crypto or crypto settlement. So I, I imagine you guys could really be effective in that flow. We see a lot of streamlining on the enramp in particular.

At the moment, it's kind of a patchwork in terms of how you enramp into US dollar stables. And like you say, you have that FX that either you as the user take on if you're holding dollars in your wallet, whether that's an essentialised exchangeer or in your self-custodial wallet, which isn't great. I, at a point earned a new SDC. I had to take on that FX risk. Luckily for me, there was a bit of political turmoil in the UK.

so the FX was going in my favor. But for example, you know, if you are a large financial institution, a few basis points here or there can really make quite a big difference to you. For them, it's a little bit cumbersome having to hedge out that risk. So being able to offer them, if they denominate themselves in British pounds, being able to be on chain and British pounds makes a lot of sense as well. Do you think you see local currency stable coins pop up around the world in the next few months, a couple years?

Yeah. We're starting to see that in a lot of the conversations that we are having. we're looking at how we can simplify the flows that currently exist. For example, we're talking to a group of guys in Singapore. They're doing some exciting stuff out there, and we were actually talking through those flows. If they were to send us Singapore dollars at the moment, the number of intermediaries that we'd each need to go through. And we think that by taking it on chain, we can reduce that from roughly five intermediaries to three. So that's quite cool and that's quite exciting.

And obviously, that's going to take time to build up and to get that organic liquidity in there. But it's moving in the right direction. People are starting to innovate in those sort of areas. And particularly between like the UK and India, the UK and global South, you know, the UK in Africa, Nigeria, Kenya, South Africa, there's a lot of flow that goes that way. And so being able to do that on chain

and like you say, you know, being able to settle into stable coins in those jurisdictions and not necessarily have to do the off ramp simplifies the process drastically. How do regulators view, crypto and a GVP stablecoin, as well as larger banks institutions that might have regulatory influence? Stablecoins in the UK, to go back a step, are kind of split if that makes sense.

And we have two regulators. We have the FCA, which basically regulates all financial institutions. And then we have the PRA, which sits under the Bank of England, which is the UK Central Bank, which regulates banks. And so they are going down different regulatory paths. And they're starting to come together. and they're starting to talk a little bit more, and the understanding between the regulators

and firms and institutions in the sector is starting to align. However, there's still quite a long way to go. The UK is behind other jurisdictions in terms of where it is in its regulatory process. We're still at the discussion paper stage. The DPs and the SIs are still coming out, and we're still talking about a lot of things.

However, I do feel like there's a lot more clarity in how stable coins are going to be viewed, You know, the EFCA, for example, we're going to look at them as a crypto asset and not as e-money. And making those differentiations has been really important for not only us as an organization, but also a lot of the businesses that we want to face off because really, at the end of the day, they can have as much innovation and be as excited about stable coins as they like. But if they're compliances and legal departments aren't willing to sign off, then it's not going to go very far.

I guess to sum up, we don't have any regulation at the moment. we're trying to fit stable coins into existing registrations that currently exist. And I think that will be about a year or two away before we get any dedicated UK stablecoin regulations. So I guess at the moment, we can backdoor through anti-money laundering registrations, so to speak. But I would say there is a little bit of hostility still there. But there's been a huge shift in the tone, which is what was really positive. a couple of our advisors were at some roundtables at 0.0 last week, and there was a lot of central bankers there. And again, they said the tone of the conversation and the level of understanding is quite exciting and making them feel quite optimistic.

There's definitely a shift to being pro-innovation, crypto-friendly, and trying to be one of the first movers within this as we go forward. You must have some interesting conversations with powerful institutions, because I imagine you speak. to banks about all the things you guys want to do and are excited to do. And you're probably in some ways worried what if they decide they want to issue a GVP stable coin. Does that cross your mind? It's a question that comes up almost every day. Someone says, you know, what if the large incumbents come in? You can almost split that conversation up into sort of a number of different buckets, so to speak. So if you look at like banks at the moment, there's a real worry from the PRA, which is under the Bank of England, potential regulatory authority.

that regulated businesses could start offering unregulated financial products. So they're really saying to banks, we need you to wait until we have the clarity that we need until we have the regulation before we can have you start doing this. So it's not so that the banks don't want to, it's that they can. We've kind of been making the most of that. But then if you look at existing stable coin businesses and organizations, I think a lot of them, you know, with the conversations that we've had, they feel like there's still so much for them to go after doing what they're doing at the moment,

you know, within the dollar economy itself, there's still so much growth. So we're kind of operating under the radar. I think there's a lot more traction within the UK and within GBP, you know, within the last three, four months than there was even last year. The tide is really starting to turn. Will they allow this innovation to exist, the British regulatory bodies? And I would say the folks are probably lobbying there, or do you think there will be pushback? I don't think there'll be pushed back from the banks. I don't think there'll be pushed back from the industry itself. I mean, UK financial institutions have always been quite open to innovation. That's refreshing. I wish we had that. Yeah, maybe that's a slightly controversial view. I'm not sure.

But if you look at, for example, payments innovation in the UK, we were very quick to move to like mobile banking, for example. We were one of the first countries to start using contactless with the widespread adoption that we had. So people are quite open to using new forms of money and new forms of payment systems. So I think financial institutions especially can see the advantages. I think a lot of them were going to do it earlier. You know, in 2022, I know there was a large UK bank

that was looking at doing their own stable coin and actually offering cryptocurrency purchases within their own online banking app. But then FDX happened, and the compliance department just said, hell no, we can't do any of this ourselves. So it's not that they don't want to do it, it's that they can't at the moment. How important is it that you guys are a UK-based company? I think it's one of the most important parts of boroughs at the moment.

Getting a local regulator on side, you need to have a local presence. Particularly with the FCA authorizations are globally recognized. It's one of the most trusted and respected regulators globally. It gives us a few benefits. It enables us to conduct a few more activities, some of which require local authorisations to do those activities. But typically the regulator likes to use local authorization as a condition for being able to undertake certain types of business, particularly when it comes to facing off retail customers. And not only that, it gives UK institutions a lot

of confidence. The city is one of these strange places where if you come knocking on their door and you're regulated through one of the slightly more greyer jurisdictions, their tails are automatically going to be up and they're going to be saying, hang on, why you try to circumvent what's already there. It gives us the ability to get partnerships, particularly with compliance teams. Yeah, I imagine there's a comfort level that comes with it. I'm curious for your perspective, being a stable coin issue where there's the traditional business of net interest margin, you make money on deposits, especially in the context in the UK, you've had innovation in the fintech space. You've seen new players in mobile banking. You've seen new business models. How do you look

at your best viable business model long-term or even more widely, what the best business model for someone taking on this opportunity of new currency stable coin? The net interest margin is always going to be a factor. I think what's lucky for us at the moment is that the FC has said that no interest shall be given to the token holder. They don't want yield-bearing stable coins to be a thing. Interesting. They proactively said that. Yeah. They all kind of at the moment want one to always be one. However, I think as our business develops and changes and grows, we don't want to necessarily just be reliant on that because you're basically one line within a piece of regulation away from your entire business model, but no longer existing.

We see a lot on the transaction fee side. We actually see a lot on the banking element as well. If you're able to access deposited funds, you can potentially offer banking services to corporates like lending payments, but then also on the yield bearing side as well. we see a lot of opportunity there. I think regulators are more open to a new bank than an organization like us progressing into something that looks very like a bank as opposed to an existing bank starting to offer new forms of business. You know, they're a little bit cagey about the contagion risk that sits there. So UK banks have real uphill battle with regulators and that's something that I

think we as an organization can capture within our own business model. So I think over time, we would quite like a Gant to start looking more like a bank and the types of banking services that we'd be able to offer. We can generate revenue from that. With regulatory considerations in mind, how do you look at launching on private blockchains versus permissionless blockchains? I think they all have their place. And we talk to some asset managers that want to solve,

you know, use table coins to solve an internal use case. And so whether that's on a public ledger or private ledger is kind of neither here nor there. However, I'm a strong believer that we should be on public blockchains as much as we can. And I think when you see a lot of the innovations in being able to hide transactions and shield vulnerabilities away, we want a degree of transparency, but there are times and places where that transparency isn't good. There's certain networks out there that are really innovating in that space and making it quite exciting for us to be a part of that. and going to institutions, we can see the value proposition of both. That's a personal viewpoint, to be clear, the preference for permissionless blockchains.

No, that is a personal preference. I mean, I think there's a lot of advantages to public permissionless technology. What other product directions are you excited about potential adjacencies? We get really excited about being able to generate sustainable risk-adjusted returns. And I know that sounds quite a mouthful, but I feel like a lot of the returns in DFI aren't particularly sustainable long term. I think being able to bring real-world returns and distribute them on chain, you know, things get quite exciting.

It's quite apparent that if you're going to take financial services on chain, the risk-free rate isn't necessarily attractive enough. And so you need to be offering something that's slightly more enhanced, a few percent more. So being able to do that is something that we get quite excited about. But then there's different aspects. I was having a conversation earlier today about effectively creating funds of funds where you can diversify out that risk. So yeah, risk-weighted returns on chain where people can see enhanced returns

without necessarily having to take on incredible amounts of risk. I personally get quite excited about that side of things. Yeah, it's interesting because I feel like we've built two opposite sides of the coin in that you have savings accounts, almost traditional bank accounts, which allow you to hold money very well, and then you have the highly speculative defy yield side. But the middle ground is not that well served. You've Goldman Sachs high yield savings accounts in some equivalence, but it still feels like, to your point, attractive, steady rate investment products are somewhat gate kept. 100%. And a lot of these organizations and funds that maybe offer these financial products,

like you say, you know, the minimum ticket might be 10 million pounds. We were able to come in and we were able to act as the LP for those organizations. And then we can effectively fractionalize our stake within them. And we're effectively democratizing those returns because in reality, if you're able to take, let's say, you know, somewhere between 8% and 12% annually, the returns are completely uncorrelated to financial markets. And the level of risk that you're taking is significantly lower than that within, you know, traditional financial markets.

That's quite in fact of proposition for a lot of people and a lot of organizations. If you look at USD stable coins and how they eventually came to what I'd consider now rapidly growing adoption, there was a really slow bleed for a while. You had them come into existence and it took a while to get to 10 million, 20 million in total supply. Do you think that will be the same process we see with a GVP stable coin and other alternatives and then we'll have an inflection and that's for rapid growth we see with USD today? Not really when we launch, hopefully, in the next few months. I don't think her growth will be by any means linear, but I don't think it will be slow initially because I do think there is a base level demand

that really wants a financial product on chain that isn't necessarily dollars. I think initially for us to get to a circle or a tether kind of size, then yeah, you know, that's going to take a while and there probably will need to be an inflection point that we would consider as reaching mass adoption. However, for us to get to a model, modest size with a few commas and zeros, I honestly don't believe that that's going to be

particularly long for us. You know, the types of conversations that we're having and the types of organisations that are reaching out to us demonstrates that there is this demand. You know, I think that's one thing that has been quite surprising is how easily we've been able to have a lot of the conversations that we're currently having. What dollar stable coins has done for us as they demonstrate the proof is in the pudding. What's also quite helpful for us is that global financial markets, while the majority is dollars, there's a lot of value that's also not the UK financial ecosystem, you know, the whole industry, a lot of that's not dollars, but a lot of the use cases can be applied directly to those organizations.

We're feeling pretty optimistic about our trajectory and also that for the industry as a whole. To your point, I think there is and will continue to be demand. Who do you think are the winners and losers once you guys are at scale and other companies? upper players are at scale. I sat on a panel a few weeks ago in front of a bunch of bankers and I basically said, you know, you need to start embracing this or are you going to become a victim of it? I would say if I was any financial institution, you know, the investment banks and the investment banks on the whole, if they manage their risk, they're going to survive in one firm or another. Where I would be nervous is if I was within the retail banking system. If I'm an individual within

take the UK, for example, and I have my savings with a standard high street retail bank. I'm only covered up to 85,000 pounds. Anything more than that, I'm subject to the bank's own risk and its own reserves. They're fractionally backed. And if I could be fully backed, I would choose to be fully back, not fractionally backed. So yeah, I think the UK retail banking system is probably the most at risk, although I'm sure the regulator will find ways to protect them if they need to. Presumably these yield-bearing and interesting. for them, though, at least, as business models that they can almost leach onto. I think so. And I think maybe that's what we start to do is view them as a distribution

channel, look at how we can integrate. I do think that they'll come a point where a lot of these financial institutions will turn around and say, well, if we can't beat and we'll join them. Otherwise, they will be put under significant pressure. Longer term, do you guys want to be one flagship product, more akin to a circle? or do you want to be a suite of products or somewhere in the middle when it comes to how many tokens non-chain offerings you have? I think we're organically finding that out ourselves. I mean, we initially wanted to start as this retail on an off ramp that was integrated

with open banking and automated KYC and AML to make this seamless interoperability between be it and pounds on chain. And I guess as we've sort of developed as individuals and as an organization, we've seen that change between client demand and also our own ideas. I think yield products on chain make a lot of sense. And I guess we've kind of seen that with what Circle's doing with their acquisition of Hashanoke. I think for us, we will have quite a narrow suite of products. We would rather have quality over quantity. I think there's a requirement for stable coin issuers to not just be an issuer and to be a really good quality infrastructure provider as well, because at the end of the

date. If you want organizations to integrate and build on top of your product, you need to make it particularly easy and attractive for them to do that work. I wanted to ask you one final question, which is what is the user behavior change you're seeing at the moment that makes you compelled that this is going to happen or what makes you excited that you're seeing in the market? I think for us, it's the level of willingness of high level individuals in organizations that we would probably consider as not really being particularly forward thinking or innovative, being willing and open to have these conversations looking to move at a pace that we would consider to be quite fast for them and the level of ideation that they have themselves.

I think it's very easy for us to say that, you know, a lot of financial institutions and also large corporates are quite behind the curve, but I actually don't think they are. I think a lot of them are thinking about this. And so that gives us a lot of motivation, particularly in the level of inbound that we're also receiving. I don't feel like we've got a huge uphill battle on finding good quality distribution partners. They're out there and it's up to us to deliver a commercial situation that works well for both parties. It's good to hear people are listening. It's been a pleasure having you on. Thanks for joining us.

Thanks for having me. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.