Abstract
The April 2025 research article, "The Looming Threat of Uninsured Nonbank Stablecoins" (SSRN), highlights the systemic risks associated with stablecoins that operate outside traditional financial safeguards—particularly those lacking federal deposit insurance, audited reserves, or regulatory oversight. However, not all nonbank-issued stablecoins share these vulnerabilities. Ohanae Coin (OUSD)—a Covered Stablecoin issued by Ohanae Securities LLC, a Special Purpose Broker-Dealer (SPBD) pending FINRA approval—was purpose-built to comply with SEC and FINRA standards while serving as a secure, tokenized cash instrument for capital market settlement. This article contrasts the risks identified in the SSRN paper with the robust, regulation-first model employed by Ohanae Coin, illustrating how compliant digital dollars can safely modernize financial infrastructure.
1. Regulation, Not Labels: Understanding Stablecoin Risk
The SSRN article does not claim that all nonbank stablecoins are inherently dangerous—it warns that stablecoins issued without regulatory coverage or transparency pose significant financial risk. These "uninsured shadow stablecoins" can function like bank deposits but without protections for consumers or the broader financial system.
The SEC's April 4, 2025 Statement on Stablecoins explicitly allows nonbank entities to issue Covered Stablecoins, provided they meet strict criteria:
- Fully backed 1:1 by cash or cash equivalents
- Issued under a regulatory framework (e.g., SEC Rule 15c3-3)
- Do not distribute interest, profits, or confer governance rights
- Do not expose holders to the financial performance of the issuer
- Maintain proper custody and recordkeeping infrastructure
The true risk divide is not "bank" vs. "nonbank," but rather regulated vs. unregulated. Ohanae Coin sits squarely on the regulated side of that divide.
2. Ohanae Coin: A Covered Stablecoin Built for Capital Markets
Ohanae Coin (OUSD) is a Covered Stablecoin, issued by Ohanae Securities LLC, a Special Purpose Broker-Dealer (SPBD) currently pending final FINRA approval. It is designed specifically for use as a regulated settlement token within U.S. capital markets.
Key Features of Ohanae Coin:
- Pegged 1:1 to the U.S. dollar
- Fully backed by cash held in FDIC-insured accounts
- Reserves maintained in a Special Reserve Account (SRA) compliant with SEC Rule 15c3-3
- Yield earned on cash deposits is retained, not distributed, preserving SEC-compliant status
- No profit sharing, no governance rights, no investment features
- Operates on the Ohanae permissioned blockchain with 3-second finality and 16 validator nodes using IBFT consensus
OUSD is not a speculative token—it is a digitized form of cash built for regulated capital markets.
3. Ohanae's Model vs. the SSRN Warning
The SSRN paper outlines several critical risk factors inherent in most uninsured stablecoins. Here’s how Ohanae Coin addresses them:
| Risk Highlighted in SSRN | Ohanae Coin's Mitigation Strategy |
| No deposit insurance | OUSD reserves held in FDIC-insured banks with pass-through coverage |
| Opaque or illiquid reserves | 100% cash reserves in a segregated SRA; monthly public attestations |
| Redemption uncertainty | Daily par-value redemption in U.S. dollars |
| Speculative or investment characteristics | No interest, profits, or governance rights; not a security |
| Unregulated issuance and custody | Issued by a SEC-regulated SPBD; operates under Rule 15c3-3 |
| Exposure to crypto volatility | No crypto collateral or derivatives exposure; tokenized cash only |
Ohanae Coin was explicitly structured to avoid the flaws spotlighted in the SSRN study.
4. Designed for Capital Markets Settlement
Unlike retail-oriented or general-purpose payment stablecoins, Ohanae Coin is engineered for regulated capital markets infrastructure:
- Serves as a payment instrument for settlement of tokenized securities in a non-Reg NMS OTC market
- Supports Ohanae's hybrid automate market making (AMM) model
- Enables real-time clearing and settlement with low latency and blockchain finality
- Transactions are fee-free, with guaranteed par redemption
- Operated exclusively by Ohanae Securities as principal market maker
This focused application distinguishes OUSD from consumer stablecoins running on public blockchain and positions it as a regulated cash layer for tokenized securities.
5. Custody, Identity, and Investor Protections
Ohanae Coin prioritizes full regulatory compliance across custody, identity, and investor protection standards:
- Comprehensive KYC/AML and proof-of-address verification
- On-chain recordkeeping that tracks each customer's holdings in real time
- Customer cash in the Special Reserve Account (SRA) is eligible for FDIC pass-through insurance
- As a carrying broker-dealer and SIPC member, customer cash and public exempt securities held in the SRA are also eligible for SIPC protection, up to $500,000 per customer (including $250,000 for cash) in the event of broker-dealer failure
- Monthly transparency reports are published to enhance trust and auditability
This compliance stack reflects the SEC’s evolving expectations for digital asset infrastructure while safeguarding customer funds at multiple levels.
6. A Safer Path for Stablecoin Innovation
The SSRN paper delivers a clear message: stablecoin innovation cannot come at the cost of systemic stability. While many popular tokens continue to operate without oversight or meaningful reserve transparency, Ohanae Coin presents a compliant, capital-markets-grade alternative.
By combining:
- Regulated issuance via an SPBD,
- 100% cash backing with dual FDIC/SIPC protections,
- A permissioned blockchain for secure on-chain settlement, and
- Transparent, yield-retaining reserve management,
Ohanae Coin (OUSD) provides the regulatory model that others must follow if stablecoins are to become trusted infrastructure in the U.S. financial system.
Further Reading
SSRN: The Looming Threat of Uninsured Nonbank Stablecoins (April 2025)
Ohanae Coin (OUSD)—A Covered Stablecoin for Tokenized Capital Markets (April 2025)
Disclaimer
Ohanae Securities LLC is a subsidiary of Ohanae, Inc. and member of FINRA/SIPC. Additional information about Ohanae Securities LLC can be found on BrokerCheck. Ohanae Securities LLC is in discussions with FINRA about exploring the expansion of business lines for the broker/dealer. Any statements regarding abilities of Ohanae Securities LLC are subject to FINRA approval and there are no guarantees FINRA will approve the broker/dealer's expansion.
Ohanae Securities is seeking approval to be a special purpose broker-dealer that is performing the full set of broker-dealer functions with respect to crypto asset securities – including maintaining custody of these assets – in a manner that addresses the unique attributes of digital asset securities and minimizes risk to investors and other market participants. If approved, Ohanae Securities will limit its business to crypto asset securities to isolate risk and having policies and procedures to, among other things, assess a given crypto asset security's distributed ledger technology and protect the private keys necessary to transfer the crypto asset security.