Simon Alexander Legge – Written Evidence (STA0052)

Introduction

With 30 years in asset management, banking, private equity and structured finance, as Managing Director of Lily B Co Ltd, I specialise in digital transformation, consulting on using Distributed Ledger Technology (DLT) to tokenise Real-World Assets (RWAs) for greater efficiency, security, transparency, and utility.[1] [2]

I also lead a Decentralised Finance (DeFi) training programme, educating financial market participants on cross-jurisdictional regulation and use of stablecoins, tokenisation and yield strategies.[3]

I submit this evidence as an independent banker, economist, educator and fintech specialist passionate about proportionate, innovation-friendly regulation. My goal is to help the UK avoid overly restrictive rules that could limit economic expansion and inclusion, and to seize the full potential of open, asset-backed, productivity-linked digital monetary systems. My daily work with institutions and professionals tracking and using blockchain ecosystems and cross-border DeFi gives me practical, balanced insight into the opportunities and risks in the Committee’s terms of reference.

1. Global and UK Market Development
1. Since the first stablecoin launch in July 2014, the sector has grown to over 150 tokens with a combined market capitalisation exceeding $307 billion and transaction volumes surpassing Visa and Mastercard combined.[4]
    
2. Growth has been driven principally by DeFi protocols and cross-border remittances, with USD-pegged stablecoins comprising c.99% of supply.[5]
    

i)     The United States’ GENIUS Act (2025) (“GENIUS”) has provided a clear, flexible framework that has accelerated institutional adoption.[6]

4. In the European Union, MiCAR[7] has constrained euro-denominated issuance to c.€650 million (<0.3% global share.) It is estimated institutional tokenisation and a digital Euro may drive this to over €25 billion+ by 2030. [8] Strict reserve requirements and compliance obligations have thus far been a constraint to scalability.
    
5. The United Kingdom currently has no material sterling-denominated stablecoins in issuance. Regulatory effort has focused on framework development, sandbox testing and clarifying tokenised collateral treatment under EMIR rather than broad market entry. [9] While appearing to be ceding ground, the UK has a significant economic opportunity in a sector where open participation drives value creation.

2. Expected development of sterling-denominated stablecoins

6. Sterling stablecoin adoption is expected to accelerate for DeFi integration, institutional settlements and remittances once regulations are finalised in 2026, with transitional arrangements enabling scaling from non-systemic to systemic status. Broader multi-money ecosystem integration is anticipated by 2030. [10]
    

a. Users and purposes

7. Stablecoins are used by corporate treasuries, institutional investors, and retail participants engaged in DeFi lending, borrowing, trading, and yield generation. Principal applications include cryptocurrency trading (43% of UK users), stores of value (26%), cross-border payments and remittances (25%), foreign exchange efficiency (21%), and merchant settlements.[11]
    

b. Existing rules constraining growth

8. The Money Laundering Regulations 2017[12] and the Financial Services and Markets Act 2023[13] impose indirect constraints. Proposed rules on custody, issuance, redemption and retail holding limits risk impeding DeFi integration and broader economic participation. [14] [15]

9. Intended to mitigate risk, these rules limit the ability of stablecoins to serve as fully productive monetary instruments backed by diversified assets and ongoing economic activity. A joint BoE–FCA framework aligned with GENIUS principles would promote international interoperability and rapid adoption of GBP-denominated instruments.
    

3. Opportunities and risks

10.         Projections indicate tokenised RWAs growing from c.$36bn (late 2025) to $100bn+ TVL by end-2026 and trillions by 2030. [16]
     
11.         Fiat transmission via traditional banking intermediaries is inequitable and slow, particularly during crises:
12.         2008: BoE and Fed QE (£200bn+ / $4.5tn) expanded reserves, but as banks hoarded liquidity, credit to SMEs and households contracted. Once liquidity flowed, it was banks with asset-backed portfolios that were able to reallocate assets and provide a multiplier effect on the broader economy, improving liquidity, reducing funding costs and stimulating credit provision.[17]
13.         During COVID: The BoE and Fed injected over £450bn and $4tn+ in QE and stimulus measures; however, the bulk flowed into asset prices and benefited large corporates, while transmission to the wider economy remained uneven. US stimulus cheques alone incurred over $600m in check-cashing fees for recipients, and many small businesses experienced significant delays in accessing funds. [18] [19]
14.         Tokenised RWAs and stablecoins could have transformed these outcomes by enabling direct, programmable, instant on-chain distributions of stablecoin-backed stimulus to individuals and SMEs, eliminating intermediaries, slashing fees, removing geographic and banking-access barriers, ensuring full traceability, delivering funds in seconds rather than weeks, resulting in faster, more equitable economic support.
     
15.         This is how Stablecoin proliferation offers transformative potential for the UK economy: through comprehensive tokenisation of real-world assets including intellectual property, natural resources, private credit and real estate, rendering them liquid and instantly accessible globally.
     
16.         When backed by the full spectrum of productive assets and supported by on-chain economic activity (e.g., lending yields, liquidity provision) stablecoins facilitate exponential value creation:
     
17.          

(RWAs × GENIUS × ZKP) = Economy˟

RWAs: Tokenised assets unlock fractional ownership, global liquidity and instant settlement

GENIUS: High-quality reserve backing anchors stability and enables yield-generating primitives

ZKP: Ensures privacy-preserving compliance and security

×: Wealth Multiplier: 10–100× growth in accessible capital and inclusion

Economy˟: Super-linear economic expansion through composability and 24/7 markets

Risks

18.         Historical de-pegging events (e.g. TerraUSD 2022) [20] and deposit outflows of 10–20% highlight volatility and monetary transmission concerns. Retail exposure to issuer failure and financial crime risks persist.
     
19.         Lack of robust internationally harmonised technical standards and protocols governing cross-chain and cross-border transmission and verification of AML/KYC data using Zero-Knowledge Proofs (ZKP) is a significant vulnerability jeopardising the integrity, security, and stability of digital asset ecosystems. [21] [22]

Advantages

20.         Stablecoins, enhanced by on-chain processes and standards like zero-knowledge proofs (ZKPs), deliver far superior privacy-preserving compliance and governance compared to traditional protocols. This enables near-instant, low-cost cross-border flows, enhances trade finance, and unlocks capital efficiency on an unprecedented scale. For the financial services sector, stablecoins introduce competition, innovation, and new revenue models. Retail customers gain financial inclusion, reduced transaction costs, and participation in yield-generating instruments.[23]
     
21.         Programmable features support capabilities largely impossible or prohibitively costly in legacy systems:

• ZKPs for real-time AML/KYC compliance and eligibility proofs without identity exposure
• transaction monitoring (including travel-rule data exchange)
• programmable enforcement (freeze/blacklist via smart contracts or controls)
• atomic/instant settlement to minimise counterparty risk (vs. T+2 or longer delays)
• automated revenue/royalty distributions via smart contracts on secondary trades
   

22.         Stablecoins backed by diversified RWAs and on-chain productivity can support universal basic income through distributed productivity gains and inclusive access to real economic activity.
     
23.         Enabling unrestricted participation via decentralised, programmable platforms with RWAs and tokenised deposits can reinvigorate global finance and deliver funding for development of infrastructure and natural resources, providing superior resilience and sustainable growth potential compared to narrowly defined structures. BIS proposes interlinked ledgers and unified standards via APIs to ensure interoperability.[24]

24.         Over-collateralised protocols with payment and liquidity provisions reduce systemic “too big to fail” risks by diversifying money issuance away from banks and large intermediaries, creating distributed, non-custodial networks with no single point of failure.[25] [26] [27]
    

4. Impact on statutory objectives

25.         Contributing c.12% to the national economy in the UK, the Finance Sector employs c. 1.1 million people directly in financial services (c.3.4% of the workforce), and accounts for over 12% of total tax receipts.[28],[29]
     
26.         When appropriately regulated, stablecoin growth advances all BoE, PRA and FCA objectives:

• Price stability: Broad asset backing and productivity-linked value enhance resilience beyond centralised issuance models.
• Financial stability: Diversified reserves and over-collateralisation mitigate run risks more effectively than algorithmic or narrowly backed designs.
• Market integrity: Blockchain transparency and ZKP integration strengthen oversight.
• Consumer protection: Mandatory redemption and yield transparency provide safeguards superior to uninsured alternatives.
• Competition: New entrants challenge incumbents while improving efficiency.
• International competitiveness and growth: Constrained approaches risk undermining growth objectives; open, asset-backed systems align with exponential economic potential. Flexible frameworks position the UK as a global hub, enabling participation in universal economic expansion rather than isolation through restrictive controls.

In particular, the continued ability to compete and lead globally would greatly improve with the adoption of stablecoin policies and regulation.

5. Implications

27.         The proposed regimes constrain scalability, deter yield models and limit DeFi integration.
     
28.         Flexible backing (including productivity-linked RWAs) would accelerate adoption, enhance viability and strengthen competitiveness without compromising stability. Equivalence with GENIUS would facilitate cross-border interoperability, avoiding regulatory arbitrage and supporting seamless global economic engagement.
     
29.         Real-world progress shows: tokenised private equity and venture-style funds like Ondo Finance leveraging BlackRock's BUIDL tokenised Treasuries are live and scaling with reduced capital costs and lower risk premiums through instant access and secondary market trading.[30]
     
30.         Greater and more efficient Private Equity and Venture Capital:

• Fractional ownership of PE/VC funds (minimums drop from £1m+ to £1)
• Instant secondary liquidity (v. 7–10 yr lock-ups)
• SPAC/VC fundraising settling in seconds on-chain with stablecoin payments

Stablecoin rails + RWAs would transform illiquid markets, significantly enhancing the UK’s position as a leader in Capital Markets and Finance.

6. Conclusions

31.         The US GENIUS Act shows flexible reserve composition (including RWAs) fosters innovation and growth;[31] by adopting similar openness, the UK can align more closely with the EU's MiCAR through mutual recognition, combining US-style yield generation with EU consumer safeguards to enable seamless sterling-euro stablecoin interoperability and joint digital asset markets.

Key lessons for the United Kingdom: Avoiding Pitfalls and Accelerating Adoption

32.         Consider broad access, interoperability, inclusivity and robust cybersecurity: Promote education, public-private pilots for retail and SME payments, and transparent yield disclosure to build user trust and confidence; require seamless standards connecting stablecoins with legacy systems and tokenised deposits; incorporate accessibility measures like simplified onboarding for SMES and the unbanked; and enforce smart-contract audits, oracle resilience and decentralised insurance to address exploits and quantum risks
33.         Prioritise open participation in an asset-backed, productivity-driven monetary system that mitigates risks while enabling superior growth, including future capacity to support mechanisms such as universal basic income in an exponentially expanding economy
34.         Promote DeFi innovation: Expand the FCA 2026 sandbox for sterling stablecoins[32] to include DeFi testing, introduce mutual recognition with GENIUS equivalence; differentiate treatment by type; favour over-collateralised/fiat-backed models, avoid high-risk algorithmic designs, overly restrictive holding limits or reserve requirements; encourage and foster UK competitiveness and prevent regulatory uncertainty with clear, flexible/tiered upfront rules and retain activity onshore[33]
35.         Permit high-quality RWA backing so stablecoins derive value from productive economic activity rather than narrow reserves, unlocking exponential expansion through global productivity capture
36.         Integrate ZKP for real-time, privacy-preserving AML/KYC compliance without exposing personal data, aligning with EU MiCAR to facilitate cross-border adoption, reduce fragmentation, and support shared goals like sustainable growth and universal basic income in an expanding economy.

37.         Balance sustainability and long-term viability: prioritise proof-of-stake or carbon-neutral blockchains with energy disclosures, and establish innovation-friendly taxation frameworks for holdings, transactions and yields
38.         Targeted Outcome: Achieve a faster adoption curve, establish the UK as a credible hub for GBP-denominated stablecoins interoperable with the eurozone for inclusive economic expansion and avoid the slow progressing market “sourness” of more restrictive jurisdictions[34]

11 March 2026