Abstract
The rapid proliferation of stablecoins has raised red flags across regulatory and academic circles, as highlighted in Financial Times journalist Katie Martin's recent article, shared by Professor Kelvin Low. These warnings focus on the systemic risks posed by stablecoins that lack transparency, redemption assurance, and regulatory oversight. In response, Ohanae Coin (OUSD) offers a regulatory-compliant alternative—structured as a Covered Stablecoin and issued by Ohanae Securities LLC, a Special Purpose Broker-Dealer (SPBD) pending FINRA approval. Backed 1:1 by FDIC-insured deposits in a Special Reserve Account and built for capital markets settlement, OUSD demonstrates how stablecoins can be issued and operated safely within a clear legal framework. This article analyzes why Ohanae Coin avoids the vulnerabilities outlined in recent commentary, and why tokenized Money Market Funds (MMFs)—not stablecoins—are the appropriate vehicle for yield-bearing digital assets under the Investment Company Act of 1940.
1. A Rising Concern: Unregulated Stablecoins in the Spotlight
In a LinkedIn post, Professor Kelvin Low flags important concerns raised in Katie Martin's Financial Times column: many stablecoins that claim to be "backed" or "pegged" to fiat currencies operate with little to no regulatory scrutiny or customer protection. These instruments introduce:
- Redemption risk
- Run risk during market stress
- Lack of deposit insurance
- Reserve opacity and discretionary operations
In essence, they mimic bank deposits without providing the safety, soundness, or transparency expected from traditional financial products.
2. Covered Stablecoins Are Not the Problem—Uninsured Ones Are
As clarified in the SEC's April 4, 2025 Statement on Stablecoins, Covered Stablecoins may be issued by nonbank entities so long as they meet clearly defined criteria:
- Fully backed 1:1 by cash or cash equivalents
- Custodied in compliance with SEC Rule 15c3-3
- No distribution of interest or profits to token holders
- No governance, ownership, or investment rights embedded in the token
- Operate within a transparent, auditable framework
This distinction is critical: nonbank stablecoins are not inherently risky, but uninsured and unregulated ones are.
3. Ohanae Coin: Designed for Safety, Built for Settlement
Ohanae Coin (OUSD) is a model example of a compliant, institutional-grade stablecoin. Issued by Ohanae Securities LLC, a Special Purpose Broker-Dealer (SPBD) pending final FINRA approval, it is structured for capital markets use, not speculation or lending.
Key Safeguards:
- 100% U.S. dollar backing in a Special Reserve Account (SRA)
- All deposits are held at FDIC-insured banks
- The SRA is maintained under SEC Rule 15c3-3 for customer protection
- Ohanae Securities does not lend, stake, or invest customer funds
- All interest is retained in the SRA, not distributed—ensuring OUSD is not a security
Insurance and Compliance:
- FDIC pass-through insurance applies, thanks to individualized recordkeeping
- As a carrying broker-dealer and SIPC member (pending approval), customer cash and public exempt securities held in the SRA are also SIPC-protected, up to $500,000 per customer (including $250,000 for cash) in the event of broker-dealer failure
4. Engineered for Capital Markets—Not Crypto Speculation
Ohanae Coin is used exclusively as a payment and settlement instrument on Ohanae's non-Reg NMS OTC market, supporting the trading of tokenized securities.
- It enables instant, atomic settlement using a hybrid automated market making (AMM) settlement model
- Finality is achieved within 3 seconds on the Ohanae blockchain
- Blockchain infrastructure includes 16 validator nodes using IBFT consensus
- Ohanae Securities acts as principal market maker, ensuring orderly execution
Unlike most stablecoins, OUSD is not involved in leverage, yield farming, or crypto derivatives. It is a digitized representation of insured cash, not a financial instrument with embedded risk.
5. Covered Stablecoins ≠ Yield Instruments — Enter Tokenized MMFs
It's important to distinguish between non-yielding Covered Stablecoins and yield-bearing crypto asset securities. The SEC has made clear that Covered Stablecoins must not offer interest, profits, or investment rights—otherwise, they risk classification as securities.
So where does yield belong? In tokenized Money Market Funds (MMFs).
Regulated MMFs:
- MMFs are regulated under the Investment Company Act of 1940 and Rule 2a-7
- They offer yield-bearing exposure to short-term, high-quality debt instruments
- MMFs are registered with the SEC, maintain daily liquidity, and disclose holdings
- When tokenized, they can function as digital, investment-grade cash equivalents
Dual Asset Framework:
| Instrument | Role | Regulatory Framework |
| Ohanae Coin (OUSD) | Payment + Settlement | SEC Rule 15c3-3, SPBD, FDIC/SIPC-backed |
| Tokenized MMFs | Yield-bearing liquidity | Investment Company Act of 1940, Rule 2a-7 |
This approach enables secure settlement (via OUSD) and digital cash investment (via MMFs) without regulatory ambiguity.
6. Conclusion: Stability by Design, Not Assumption
The risks flagged by Professor Kelvin Low and Katie Martin are real. Many stablecoins in circulation today lack sufficient reserves, insurance, or regulatory guardrails, and may pose systemic threats during moments of market volatility.
But Ohanae Coin (OUSD) is not one of them.
It is:
- 100% cash-backed
- FDIC- and SIPC-insured
- Issued under SEC compliance
- Purpose-built for settlement in tokenized capital markets
As the financial system modernizes, institutions will require both secure payment tokens and regulated yield instruments. Ohanae is building both sides of that future—with Covered Stablecoins and tokenized MMFs working in tandem.
Further Reading
Ohanae Coin (OUSD)—A Covered Stablecoin for Tokenized Capital Markets
Why we should worry about the rise of stablecoins by Katie Martin
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.