It’s been just over two weeks since the Office of the Comptroller of the Currency published its proposed rules for stablecoins under the GENIUS legislative framework.
The resulting consultation document runs to no less than 376 pages. We did want to read it all of it. But in our rush to grow The Peg and chase industry interviews, we haven’t yet had the chance to go through it with quite the tooth-and-comb it probably deserves.
Fortunately, the team at Omnia has beaten us to it. While there isn’t a public link to their analysis, which was circulated this week, it’s a really thoughtful look at what the rules might actually mean in practice, and The Peg thinks it deserves wider attention.
What makes it particularly useful is that it doesn’t just summarise the regulatory language, but also works through the economic incentives embedded in the framework.
One of the most striking conclusions: banks may be better off distributing stablecoins rather than issuing them themselves.
Omnia puts it pretty bluntly:
Banks should be racing to sign the earliest deals with the issuers, all of whom are dying for access to the breadth of the banking sector.
The argument comes directly out of the economics implied by the proposed rules.
Running a compliant stablecoin issuer under the OCC framework will be expensive. There are liquidity requirements, capital buffers, vendor-management obligations and operational controls that collectively make the model work best at scale.
Omnia estimates that the minimum viable scale for a standalone issuer is roughly $2–3bn in circulating stablecoins. Below that level, fixed costs — compliance, regulatory supervision, capital buffers and OCC assessment fees — simply don’t amortise properly. Above it, the economics start to work in most interest-rate environments.
That creates an interesting strategic divide.
A relatively small number of large issuers can justify the infrastructure and regulatory cost of running a compliant coin. But banks — particularly regional ones — may find it far more attractive to simply distribute someone else’s stablecoin rather than launching their own.
In that world, stablecoins start to look less like private currencies and more like a financial product with a distribution network, says Omnia. The issuer runs the regulated infrastructure and manages the reserves. Banks provide access to customers.
Issuer-as-a-service
This leads to one of the more interesting parts of Omnia’s analysis: the OCC’s rules favor the growth of “issuer-as-a-service” business models like Paxos, but at the same time, reveal the OCC to be wary of the model.
The concern, it seems, is contagion.
If several stablecoins share the same infrastructure and operational structure, problems with one coin could spill over into the others. As Omnia explains, regulators worry that market concerns about the liquidity or capital backing of one branded stablecoin could easily spread to the rest of the platform.
In other words, if one coin looks shaky, investors might assume the others powered by the same provider share the same risk.
There are a couple of ways regulators could deal with this.
The most draconian option, they note, would require each issuer entity to issue only a single stablecoin brand.
A less severe approach would allow multiple coins but require legally distinct reserve assets for each one, even if they share operational infrastructure.
The aim, ultimately, is to eliminate contagion risk. If one stablecoin becomes insolvent, regulators want to make sure it can be wound down without dragging the others down with it.
But Omnia notes that there’s an important trade-off.
If the rules ultimately land on the stricter side, the issuer-as-a-service model becomes much less efficient. Platforms lose the ability to share operational costs across multiple coins, and the minimum viable scale for launching a stablecoin rises accordingly.
Run prevention
The proposed framework also includes a fairly detailed liquidity structure.
Issuers will be required to keep meaningful buffers, not just in Treasuries.
At least 10 per cent of reserves must be held as deposits at a minimum of two banks or directly at the Federal Reserve, ensuring immediate liquidity. On top of that, 30 per cent of assets must mature or be receivable within 30 days.
The rationale for the rule is straightforward: ensure issuers have enough liquid assets to meet redemptions even during stress.
But Omnia highlights an interesting structural feature around redemption timing.
The framework effectively creates a two-day redemption window. That might sound slow for something designed to function like digital cash, but the logic is actually about run prevention.
If redemptions were instant, any operational delay could look like a stablecoin “breaking the buck”, which historically is exactly the signal that triggers panic.
A defined two-day redemption window, with the option to extend to a seven-day window in stress scenarios, gives issuers time to manage liquidity during periods of stress without markets interpreting short delays as insolvency.
In other words, it quietly builds a buffer against bank-run dynamics without explicitly calling it that.
The strange capital economics of stablecoins
One of the more subtle points in Omnia’s analysis is about how capital requirements interact with operating costs.
Under the OCC’s model, operating expenses inside the issuing entity effectively require matching capital backing — something the BoE is seeking to require, as well.
In practice, that means every dollar spent running the issuer has to be supported by low-yield assets sitting in a regulatory backstop.
Put more simply: every $1 of internal operating cost requires roughly $1 sitting idle on the balance sheet.
That creates a powerful incentive to keep the issuing entity lean.
Expensive activities like marketing, distribution and retail customer support are likely to be pushed outside the regulated issuer into parent companies, affiliates or third-party partners.
Core functions still have to remain inside the issuer — things like technology infrastructure, compliance systems and risk management — because the OCC’s vendor-management rules prevent the creation of hollow shell issuers.
But everything else can sit outside the regulated entity, where it doesn’t require capital backing and can scale more flexibly.
The result is a structure that looks quite familiar in finance: a tightly regulated balance-sheet core surrounded by a larger ecosystem of service and distribution partners.
Which brings us back to banks
Put all of this together and the structure that emerges looks a lot less chaotic than the current stablecoin landscape.
A small number of large regulated issuers managing reserves and compliance.
And a much larger set of banks and fintech companies acting as distribution partners.
Which is why Omnia’s most practical takeaway may also be its simplest. Banks should be racing to partner with existing issuers rather than trying to build their own coins.
