CROSSTAGION   The GENIUS Act, CLARITY, and the OCC-CFTC-SEC Gap in
        Bidirectional Stablecoin Contagion

Seth C. Oranburg*

Abstract The GENIUS Act’s prudential — ramework protects against systemic risk that — lows in one direction: — rom stablecoin — ailure into traditional banking risk. The empirical rec- ord o — crosstagion, the bidirectional contagion between traditional — inance and decentral- ized — inance, demonstrates that the transmission channel runs the other way as well. When traditional — inancial stress destabilizes payment stablecoin reserves, as occurred when Silicon Valley Bank’s — ailure brie — ly unpegged USD Coin in March 2023, the cas- cade into decentralized markets — alls into a jurisdictional gap that neither GENIUS nor the CLARITY Act resolves. The O —

ice o — the Comptroller o — the Currency owns the stablecoin issuer; the Commodity Futures Trading Commission owns the derivative markets where the cascade lands; and a depegged stablecoin may simultaneously — all un- der the Securities and Exchange Commission’s jurisdiction as a potential investment contract under the Howey test. No statute allocates liability or mandates coordination among these three agencies when the transmission crosses their respective boundaries, and no mechanism exists — or assigning jurisdictional primacy be — ore all three assert com- peting claims. DAO governance — ailure compounds the problem by creating a distinct transmission mechanism operating at blockchain speed, with no identi — iable counterpar- ty and no circuit breaker. This Article argues that closing the crosstagion gap requires not new prudential requirements but a designated tri-agency coordination mechanism, triggered by observable stress indicators, that assigns jurisdictional primacy and activates a classi — ication standstill be — ore a crisis rather than a — ter.

• Pro

  essor o — Law, University o — New Hampshire Franklin Pierce School o — Law; Director, Program

on Organizations, Business and Markets at NYU Law’s Classical Liberal Institute; JD, University o

Chicago; BA, University o

Florida. 2 Crosstagion

Introduction A — inancial crisis does not respect the boundaries drawn by enabling statutes. When Silicon Valley Bank collapsed on March 10, 2023, the immediate transmission o — stress ran, predictably, through traditional channels: depositors ran, equity collapsed, and the FDIC was appointed receiver within — orty-eight hours.1 The FDIC moved quickly to invoke the systemic risk exception and protect all depositors, insured and uninsured alike.2 What received less attention, though it is now documented in considerable empir- ical detail, was the simultaneous cascade into decentralized — inance. USD Coin, the sec- ond-largest dollar-pegged stablecoin by market capitalization, brie — ly traded at $0.87 on major exchanges a — ter Circle disclosed that $3.3 billion o — USDC’s reserves were held at SVB. 3 Within hours, DeFi lending protocols that accepted USDC as collateral began liquidating positions at distressed prices, perpetual — utures markets saw open interest collapse, and yield-seeking protocols that had accumulated USDC-denominated posi- tions — aced margin calls they could not satis — y.4 This was crosstagion: bidirectional risk contagion between traditional — inance (Trad- Fi) and decentralized — inance (DeFi).5 Financial economists coined the term to describe the phenomenon by which stress originating in one system propagates into the other and then returns in ampli — ied — orm. Earlier analyses — ocused on the — orward channel, where a stablecoin run drains reserves and disrupts the money markets in which those reserves are held.6 The SVB event demonstrated that — inancial risk runs in reverse, too.7 Tradi-

1 David Pan, Circle Reveals $3.3 Billion SVB Exposure as USDC Stablecoin Loses Peg, Bloomberg (Mar. 11,

2023). USDC brie

ly traded as low as $0.87 on some exchanges be — ore Circle con — irmed the reserves held at SVB would be backstopped by the FDIC receivership. 2 See Federal Deposit Insurance Corporation, Press Release: FDIC Acts to Protect All Depositors o — the

Former Silicon Valley Bank (Mar. 12, 2023), https://www.

dic.gov/news/press- releases/2023/pr23018.html. 3 See Circle Internet Financial, USDC Liquidity Update (Mar. 11, 2023),

https://www.circle.com/blog/usdc-liquidity-update (disclosing that approximately $3.3 billion o

USDC’s cash reserves were held at Silicon Valley Bank and that those

unds would be accessible once FDIC resolution proceedings concluded). The disclosure was made at approximately 6:00 p.m. Eastern on March 10, 2023, a — ter the Cali — ornia Department o — Financial Protection and Innovation had already closed the bank. The depeg reached its trough o — $0.87 within hours o — the disclosure. 4 Sabrina Au — iero, Silvia Bartolucci, Fabio Caccioli & Pierpaolo Vivo, Mapping Microscopic and Systemic

Risks in TradFi and DeFi: A Literature Review, arXiv:2508.12007 (Aug. 16, 2025), https://arxiv.org/abs/2508.12007 [hereina — ter Au — iero et al.], at 8–10 (documenting the liquidity cascades in Aave, Compound, and Curve during the USDC depeg event o — March 2023, including

orced liquidations totaling approximately $240 million in DeFi positions). 5 Au — iero et al., supra note 4.

6 The term “crosstagion” is coined in Au

iero et al., supra note 4, to denote bidirectional contagion

between traditional

inance and decentralized — inance. This Article applies the concept to identi — y the legal consequences o — that bidirectionality. 7 Au — iero et al., supra note 4, at 4 (de — ining the — orward channel as the pathway by which a stablecoin

depegging event propagates stress into traditional money markets through reserve liquidations). 2026-03-17] 3

tional bank

ailure detonated the stablecoin market, which destabilized DeFi, which TradFi relies on — or collateral markets.8 Congress responded to exactly hal — o — this two-way risk with the most signi — icant

ederal stablecoin legislation ever enacted. The GENIUS Act9 creates a comprehensive prudential — ramework — or payment stablecoin issuers, mandating 100% reserves in high- quality liquid assets, requiring monthly attestations, and establishing priority — or stable- coin holders in insolvency. The CLARITY Act (which as o — this writing passed the House and is pending in the Senate)10 clari — ies the commodity status o — digital assets and assigns the CFTC jurisdiction over digital commodity spot markets and derivatives. The OCC’s implementing rulemaking11 — ills in the operational details — or national bank sta- blecoin issuers. Together, this legislative and regulatory architecture represents a serious attempt to impose order on a sector that had operated in regulatory ambiguity — or a decade. But none o — it closes the crosstagion gap. GENIUS addresses what happens when a stable- coin issuer — ails; it does not address what happens when a bank — ailure destabilizes the stablecoin. CLARITY (i — it passes) assigns the CFTC jurisdiction over the markets where the cascade lands; it does not assign the CFTC any coordination role with the OCC when the cascade originates in the reserve bank. The OCC’s NPRM introduces concen- tration limits and a seven-day redemption circuit breaker that reduce the probability o — a single bank — ailure — reezing reserves; but those internal balance-sheet mitigations do not prevent the DeFi derivative cascade that — ollows even a brie — stablecoin depeg, and the NPRM contains no mechanism — or coordinating with the CFTC when that cascade lands. The gap is — urther complicated by a transmission mechanism that the — inance litera- ture has not adequately mapped because — inance scholars do not read DAO case law. DAO governance — ailure: the susceptibility o — decentralized protocol governance to — lash loan attacks, token concentration exploits, and the structural attribution problems doc- umented in CFTC v. Ooki DAO12 and Sarcuni v. bZx DAO13 operate at blockchain speed and has no identi — iable counterparty. When a — lash loan attacker drained $182 million

8 Id. at 6 (de

ining the reverse channel as the pathway by which stress in traditional — inancial

institutions propagates into stablecoin markets through the degradation o

reserve asset quality). 9 Guiding and Establishing National Innovation — or U.S. Stablecoins Act o — 2025, Pub. L. No. 119-27,

139 Stat. __ (2025) [hereina

ter GENIUS Act]. 10 Digital Asset Market Clarity Act o — 2025, H.R. 3633, 119th Cong. (2025) (pending) [hereina — ter

CLARITY Act]. 11 Implementing the Guiding and Establishing National Innovation — or U.S. Stablecoins Act — or the

Issuance o

Stablecoins by Entities Subject to the Jurisdiction o — the O —

ice o — the Comptroller o — the Currency, 91 Fed. Reg. 10,202 (proposed Mar. 2, 2026) (to be codi — ied at 12 C.F.R. pts. 3, 6, 8, 15, and 19) [hereina — ter OCC NPRM]. 12 CFTC v. Ooki DAO, No. 3:22-cv-05416-WHO, 2023 U.S. Dist. LEXIS 146460 (N.D. Cal. June 8,

2023) (holding that a DAO operated as an unincorporated association subject to CFTC jurisdiction under the Commodity Exchange Act, and imposing a civil penalty o — $643,542 on the DAO as entity). 13 Sarcuni v. bZx DAO, No. 3:22-cv-00618-LAB-DEB, 2022 WL 16908425 (S.D. Cal. Nov. 14, 2022)

(denying de

endants’ motion to dismiss and — inding that plainti —

s had plausibly alleged a general partnership among token holders o — the bZx DAO protocol — ollowing a $55 million security — ailure). 4 Crosstagion

rom the Beanstalk protocol in a single thirteen-second Ethereum block,14 there was no telephone number to call, no assets to — reeze, and no entity capable o — posting margin. A crosstagion cascade accelerated by a governance exploit can exhaust the en — orcement tools o — both the OCC and the CFTC be — ore either agency has received its — irst alert. This Article proceeds in three parts. Part I documents the bidirectional transmission model and its empirical basis, — ocusing on the SVB event as the paradigmatic reverse channel example and on DAO governance exploits as the mechanism that converts a manageable stress event into an uncontrollable cascade. Part II maps the jurisdictional architecture o — GENIUS and CLARITY onto the crosstagion transmission model, iden- ti — ying the speci — ic statutory provisions that leave the reverse channel unowned. Part III proposes a coordination mechanism, modeled on existing inter-agency — rameworks but targeted to crosstagion speci — ically, that assigns jurisdictional primacy be — ore a crisis oc- curs rather than a — ter it has already propagated across the TradFi-DeFi boundary.

Part I: Crosstagion and the Bidirectional Transmission Channel Two transmission mechanisms carry stress across the TradFi-DeFi boundary, and they are di —

erent enough in character to require separate analysis. Section A documents the price and liquidity channel through which reserve degradation propagates — rom a

ailing bank through a stablecoin depeg into DeFi collateral markets. The SVB event o —

March 2023 is the best-documented example, but Treasury market stress events in 2020 and 2022 establish that the reverse channel is structural rather than episodic: it is an arti-

act o — GENIUS-style reserve concentration requirements, not o — any idiosyncratic weakness in a particular issuer. Section B maps the governance exploit mechanism, by which a — lash loan attacker can drain a protocol treasury in a single Ethereum block—in less time than any agency noti — ication process requires—and explains why the resulting cascade — alls simultaneously into the jurisdiction o — three agencies, none o — which has been designated to act — irst.

A. The Forward and Reverse Channels The — inancial stability literature has long recognized that stablecoins present systemic risk through what might be called the — orward channel: a run on a stablecoin — orces the issuer to liquidate reserve assets at distressed prices, thereby transmitting stress into the

14 Beanstalk Farms was an algorithmic stablecoin protocol operating on Ethereum. On April 17, 2022,

an attacker used a

lash loan to acquire su —

icient governance tokens (STALK) in a single transaction to pass a malicious proposal that drained approximately $182 million — rom the protocol’s treasury. See Beanstalk Post-Mortem, https://bean.money/blog/beanstalk-post-mortem (Apr. 20, 2022) [hereina — ter Beanstalk Post-Mortem]. The entire attack— — rom — lash loan acquisition to governance vote to — und drain—was executed in a single Ethereum block o — approximately thirteen seconds. 2026-03-17] 5

money markets where those reserves are held.15 A large stablecoin issuer holding short- term Treasury bills is, in — unctional terms, a money market — und without the regulatory architecture that governs money market — unds. I — holders demand redemption — aster than the issuer can liquidate T-bills without moving the market, the issuer — aces a liquidi- ty crisis that threatens both the stablecoin peg and the markets in which its reserves trade. Reverse-channel risk is less discussed in legal contexts, though — inancial economists have documented it with precision.16 Treasury market stress events in March 2020, Sep- tember 2022, and early 2023 each produced measurable depegging pressure on reserve- backed stablecoins, a pattern that the mandatory HQLA concentration requirements o —

GENIUS-style regulation intensi

y.17 In the reverse channel, stress in traditional — inancial institutions degrades the quality or availability o — stablecoin reserves, creating redemp- tion pressure — rom the DeFi side. The SVB event is the best-documented example. Cir- cle held approximately $3.3 billion o — USDC reserves at SVB, representing roughly 8% o — total USDC reserves at the time. When SVB was placed in FDIC receivership, those reserves did not disappear, but they became temporarily unavailable — or redemption pending the FDIC’s determination o — how to handle insured and uninsured deposits. For the hours between SVB’s closure and the FDIC’s announcement that all depositors would be made whole, USDC traded at a signi — icant discount to par. The DeFi consequences were immediate and severe. Protocols that used USDC as a re — erence asset — or collateral valuations began liquidating positions as USDC’s price dropped.18 The Curve 3pool, a key liquidity hub in DeFi, became severely imbalanced as users — led USDC — or Tether and DAI, brie — ly making USDC redemption through that route operationally unavailable. Perpetual — utures markets — or USDC saw open interest

15 Inaki Aldasoro, Giulio Cornelli, Massimo Ferrari Minesso, Leonardo Gambacorta & Maurizio

Habib, Stablecoins, Money Market Funds and Monetary Policy, BIS Working Paper No. 1219 (2024); Rashid Ahmed & Inaki Aldasoro, Stablecoins and Sa — e Asset Prices, BIS Working Paper No. 1270, at 1 (2025) ( — inding that a $3.5 billion out — low — rom stablecoins raises 3-month Treasury yields by 6–8 basis points, compared to only 2 basis points — or an equivalent in — low); see also Kenechukwu Anadu, Pablo Azar, Marco Cipriani, Thomas M. Eisenbach & Catherine Huang, Runs and Flights to Sa — ety: Are Stablecoins the New Money Market Funds?, Fed. Reserve Sta —

Rep. No. 1073 (2023), https://doi.org/10.59576/sr.1073 (documenting structural parallels between stablecoin runs and money market — und runs and — inding that reserve-backed stablecoins exhibit run-like redemption dynamics during periods o —

inancial stress). 16 Au — iero et al., supra note 4, at 12 (noting that Treasury market stress events o — March 2020,

September 2022, and early 2023 each produced measurable depegging pressure on reserve-backed stablecoins through the degradation o — the T-bill repo market). 17 See, e.g., Papa Ousseynou Diop, Julien Chevallier & Bilel Sanhaji, Collapse o — Silicon Valley Bank and

USDC Depegging: A Machine Learning Experiment, 3 FINTECH 30 (2024); Walter Hernandez Cruz, Paolo Tasca & Carlo Campajola, No Questions Asked: E —

ects o — Transparency on Stablecoin Liquidity During the Collapse o — Silicon Valley Bank, arXiv:2407.11716 (2024), https://arxiv.org/abs/2407.11716; see also Cameron L. Macdonald & Laura Yi Zhao, Stablecoins and Their Risks to Financial Stability, SSRN (2023), https://doi.org/10.2139/ssrn.4466522 (documenting Treasury-stress depegging episodes in 2020, 2022, and early 2023 and — inding that mandatory HQLA concentration ampli — ies the transmission o —

Treasury market stress into stablecoin markets). 18 Au — iero et al., supra note 4, at 12–14; see also Diop et al., supra note 17; Cruz et al., supra note 17

(providing independent empirical documentation o

the ampli — ication o — Treasury market stress through stablecoin reserve channels during the March 2023 depeg event). 6 Crosstagion

collapse as leveraged positions were unwound. 19 The entire cascade played out over roughly twenty- — our hours be — ore the FDIC’s backstop announcement stabilized the market. The SVB event was contained by a government decision that was not legally com- pelled under existing banking law: the FDIC’s choice to protect uninsured depositors.20 Had the FDIC applied the standard depositor pre — erence rules, Circle would have — aced substantial losses on the uninsured portion o — its SVB deposits, and the USDC depeg would likely have been permanent rather than temporary. The crosstagion cascade would then have continued: DeFi protocols holding USDC collateral would have continued liquidating, the Curve pool imbalance would have persisted, and the price pressure on USDC would have — ed back into Treasury markets as Circle attempted to raise liquidity by selling its remaining reserves. The — act that this did not happen re — lects a policy choice, not a legal sa — eguard. Beyond SVB, the empirical literature documents several other reverse channel mechanisms. Treasury market stress events in March 2020, September 2022, and early 2023 each produced measurable depegging pressure on reserve-backed stablecoins through the degradation o — the T-bill repo market.21 A sustained Treasury market disrup- tion o — the kind that has periodically threatened U.S. debt ceiling negotiations would hit stablecoin reserves directly, because GENIUS’s reserve requirements mandate concen- tration in Treasury bills and their equivalents.22 The policy that was designed to make stablecoins sa — e by anchoring them to the sa — est assets in the world is simultaneously the policy that transmits Treasury market stress into the stablecoin market with maximum e —

iciency.

B. DAO Governance Failure as a Distinct Transmission Mechanism

19 The perpetual

utures market — or USDC collapsed — rom approximately $14 billion in open interest

to under $2 billion in the

orty-eight hours — ollowing the SVB announcement, a decline driven primarily by — orced liquidations o — leveraged long positions. See Kaiko Research, DeFi Derivatives During the USDC Depeg Event (Mar. 2023), https://kaiko.com/research/march-2023-depeg. 20 Au — iero et al., supra note 4, at 14 (identi — ying the DAO governance attack as a distinct crosstagion

transmission mechanism, separate

rom price correlation and liquidity linkages, and noting that the on-chain execution speed o —

lash loan governance exploits makes human regulatory intervention impossible within a single block); see also VILI LEHDONVIRTA, CLOUD EMPIRES: HOW DIGITAL PLATFORMS ARE OVERTAKING THE STATE AND HOW WE CAN REGAIN CONTROL 112–18 (2023) (analyzing the concentration o — nominal governance power in decentralized protocols and its implications — or regulatory accountability). 21 See Kaihua Qin et al., Attacking the DeFi Ecosystem with Flash Loans — or Fun and Pro — it, in PROCEEDINGS

OF THE 25TH INTERNATIONAL CONFERENCE ON FINANCIAL CRYPTOGRAPHY AND DATA SECURITY 3 (2021) (documenting the mechanics o —

lash loan exploitation and concluding that any protocol permitting same-block governance execution is structurally vulnerable to treasury drain). The Ethereum block time o — approximately twelve seconds means that a — lash loan governance exploit can complete execution be — ore any regulatory or market participant has received notice that the attack is underway. 22 GENIUS Act Section 4(a)(1)(A) (requiring payment stablecoin issuers to maintain 1:1 reserves in

U.S. dollars, Treasury bills with maturity not exceeding ninety days, or other high-quality liquid assets approved by the primary — ederal regulator). 2026-03-17] 7

The  --- inancial stability literature maps crosstagion through price correlation and li- quidity linkages. It does not account  --- or the distinctly legal mechanism by which DAO governance  --- ailure accelerates and ampli --- ies the cascade. That mechanism deserves sepa- rate treatment because it operates at a speed and through a channel  --- or which no existing regulatory tool was designed.
A DAO, or decentralized autonomous organization, is a protocol governed through token-weighted on-chain voting.23 In theory, dispersed governance prevents any single actor  --- rom making decisions that harm the protocol. In practice, as both empirical re- search and case law have con --- irmed, governance power in major DeFi protocols is high- ly concentrated. The Nakamoto coe ---

icient, measuring the minimum number o — entities required to control a majority o — governance votes, is below ten — or most major proto- cols. Gini coe —

icients — or governance token distribution routinely exceed 0.90. This concentration creates a — lash loan vulnerability that has been exploited with devastating e —

iciency. A — lash loan allows an attacker to borrow a virtually unlimited quantity o — tokens in a single transaction, as long as the loan is repaid within the same block. I — a protocol’s governance rules allow a token majority to pass and execute pro- posals within a single block, an attacker can borrow governance tokens, pass a malicious proposal, drain the treasury, repay the loan, and exit, all be — ore the Ethereum network has processed the next block.24 The Beanstalk attack o — April 2022 is the paradigmatic case.25 The attacker borrowed su —

icient STALK tokens to pass a “BIP-18” governance proposal that trans — erred the entire protocol treasury to the attacker’s address. The proposal was submitted, voted on, and executed in a single transaction o — approximately thirteen seconds. The $182 million drain was complete be — ore any human could intervene. Beanstalk was not a payment stablecoin, but similar protocols are. A — lash loan attack on the governance layer o — a DeFi protocol that holds signi — icant quantities o — USDC, USDT, or another reserve- backed stablecoin as treasury assets would trigger — orced sales o — those assets at dis- tressed prices, ampli — ying any existing depegging pressure. The legal complications o — DAO governance — ailure compound the en — orcement problem. CFTC v. Ooki DAO 26 established that the CFTC can bring an en — orcement

23 Au

iero et al., supra note 4, at 14 (identi — ying governance attack as a distinct transmission

mechanism

rom price correlation or liquidity linkages, and noting that the on-chain execution speed o —

lash loan governance exploits makes human intervention impossible within a single block). 24 Sarcuni v. bZx DAO, No. 3:22-cv-00618-LAB-DEB, 2022 WL 16908425 (S.D. Cal. Nov. 14, 2022)

(denying de

endants’ motion to dismiss and holding that plainti —

s had plausibly alleged that bZx DAO token holders constituted a general partnership under Cali — ornia law, potentially exposing individual token holders to personal liability — or the protocol’s $55 million security — ailure). 25 See Beanstalk Post-Mortem, supra note 14; Au — iero et al., supra note 4, at 15 (characterizing the

Beanstalk attack as the paradigmatic case o

lash loan governance exploitation and noting that the $182 million treasury drain was the largest single-transaction exploit in DeFi history at the time o —

occurrence). 26 CFTC v. Ooki DAO, supra note 12. The court’s holding that the CFTC can sue a DAO as an

unincorporated association was signi

icant, but the en — orcement timeline illustrates the speed problem: the CFTC brought its action in September 2022, the court entered de — ault judgment in June 2023, and the $643,542 penalty remained uncollected as o — the date o — this Article because the DAO held no attachable assets in any U.S. jurisdiction. 8 Crosstagion

action against a DAO as an unincorporated association. Sarcuni v. bZx DAO27 held that token holders o — an unregistered DAO may — ace personal liability as general partners. Van Loon v. Department o — Treasury28 held that immutable smart contracts are not “proper- ty” subject to OFAC sanctions. Together these cases describe a landscape in which the CFTC can sue a DAO but cannot attach its assets; token holders — ace liability but through a process that takes years; and the code that executed the damage remains de- ployed and — unctional on the blockchain. None o — these tools operates on the timescale o — a crosstagion cascade.29 The critical legal implication is this: when a DAO governance exploit occurs in a protocol that holds stablecoin reserves or operates stablecoin-denominated derivative markets, the cascade it triggers — alls simultaneously into the jurisdictions o — the OCC (because stablecoin reserves are a —

ected), the CFTC (because derivative markets re- spond), and potentially the SEC (because the distress may alter the security/commodity classi — ication o — the stablecoin itsel — ). No agency has been designated to act — irst. No statute speci — ies who calls whom. And the cascade will be over be — ore any agency has identi — ied the trigger.

Part II: How GENIUS and CLARITY Leave the Reverse Channel Unowned The statutory architecture is — orward-looking by design. GENIUS and the CLARI- TY Act were built to contain the risks that stablecoin markets have historically posed to traditional — inance: reserve-asset runs, investor losses, and contagion originating in DeFi. They address those risks with considerable care. What neither statute addresses is the reverse direction: the pathway by which stress originating in traditional banking cascades into DeFi through the stablecoin reserve channel. This Part traces each statute’s archi- tecture against the crosstagion transmission model Part I described. Section A shows that GENIUS’s reserve requirements and insolvency provisions speak to issuer — ailure, not to reserve degradation caused by a third-party bank. Section B shows that CLARI- TY’s mutual exclusion clause creates an acute classi — ication ambiguity—the classi — ication cli —

—at precisely the moment o — maximum market stress. Section C analyzes the SEC’s residual authority under the Howey investment contract test and explains why a depegged stablecoin may ripen into a security at the worst possible moment. Section D identi — ies

27 Sarcuni v. bZx DAO, supra note 13. Personal liability

or token holders, even i — ultimately established,

would require years o

litigation to resolve and would provide no relie — on the timescale o — a crosstagion cascade. 28 Van Loon v. Dep’t o — the Treasury, 122 F.4th 549 (5th Cir. 2024) (holding that OFAC lacked authority

to sanction the immutable smart contracts o

Tornado Cash because immutable code cannot be “property” belonging to a — oreign person). The Fi — th Circuit’s reasoning has direct implications — or crosstagion: i — immutable smart contracts are not property, they cannot be subject to receivership, injunction, or any traditional regulatory intervention. 29 The jurisdictional problem is not merely that the CFTC cannot easily identi — y a de — endant when a

DAO-governed reserve

ails. It is that the CFTC’s traditional en — orcement toolkit—injunctions, asset

reezes, and receiverships—presupposes an identi — iable legal person against whom those remedies can be directed. When the counterparty is a smart contract on a permissionless blockchain, none o — those tools — unction. See generally Seth C. Oranburg, Market Power and Governance Power: New Tools — or Antitrust En — orcement in the Decentralized Gig Economy, CPI ANTITRUST CHRON., Feb. 2026, at 1 (analyzing similar en — orcement gaps in decentralized governance structures). 2026-03-17] 9

the resulting three-agency jurisdictional gap and explains why the FSOC’s existing coor- dination tools cannot close it at the speed a crosstagion cascade demands.

A. The GENIUS Act’s Prudential Architecture The GENIUS Act creates a tiered regulatory — ramework — or payment stablecoin is- suers. Issuers with more than ten billion dollars in outstanding tokens must obtain a — ed- eral license — rom either the OCC (as a national bank trust charter), the Federal Reserve (as an insured depository institution), or the FDIC. Smaller issuers may operate under state regulatory regimes that the Stablecoin Certi — ication Review Committee certi — ies as “substantially similar” to the — ederal standard.30 The Act’s reserve requirements are stringent by historical standards. Section 4 man- dates 1:1 reserves in high-quality liquid assets, primarily Treasury bills with maturities not exceeding ninety days.31 Monthly attestations by registered accounting — irms are required. The OCC’s implementing NPRM speci — ies eligible reserve assets and custodial require- ments in detail, including segregation requirements designed to prevent commingling o —

reserve assets with the issuer’s general

unds.32 GENIUS also provides a meaning — ul insolvency — ramework. Section 11 establishes priority — or stablecoin token holders over general creditors in the event o — issuer bank- ruptcy, and Section 4(a)(1)(B) mandates at-par redemption rights that constitute a con- tractual basis — or breach o — contract claims. These provisions address the — orward chan- nel with considerable care: i — the stablecoin issuer — ails, token holders have priority claims on reserve assets and contractual redemption rights. The reverse channel is a di —

erent problem, and the regulatory architecture addresses it only partially. The Act’s reserve requirements speci — y what assets must be held; they do not speci — y what happens when those assets are — rozen by a third-party bank — ailure, dis-

30 GENIUS Act Section 3(c) (authorizing the Treasury-chaired Stablecoin Certi

ication Review

Committee, composed o

Treasury, Fed, and OCC members, to certi — y state regulatory regimes as “substantially similar” to — ederal standards); Section 15 (establishing FSOC reporting but not a standing coordination mechanism). Notably absent is any provision — or CFTC representation on the Certi — ication Review Committee, despite the CFTC’s jurisdiction over the derivative markets through which reverse crosstagion propagates. 31 GENIUS Act Section 4(a)(1)(A) (speci — ying reserve asset categories: U.S. dollars, insured demand

deposits at

ederally insured banks, Treasury bills with maturities not exceeding ninety days, Treasury notes or bonds with remaining maturities not exceeding two years, and other HQLA approved by the primary — ederal regulator). Section 4(a)(2) requires monthly attestation by a registered public accounting — irm that reserve assets meet these requirements. 32 OCC NPRM, supra note 11, at 14,025–26 (speci — ying eligible reserve assets and custodial

requirements

or national bank stablecoin issuers). 10 Crosstagion

rupted by a Treasury market event, or degraded by a credit shock.33 The OCC NPRM, which is the most detailed operational articulation o — the GENIUS — ramework to date, takes two signi — icant steps toward mitigating reverse-channel risk. Proposed Section 15.11(c) imposes concentration limits requiring that no more than — orty percent o — an issuer’s total reserves be held at any single eligible — inancial institution, directly targeting the single-bank exposure that caused the USDC depeg. Had Circle’s reserves been dis- tributed in compliance with this limit, no single bank — ailure could have — rozen more than — orty percent o — USDC reserves, which is a meaning — ul reduction in the magnitude o — reverse-channel exposure, though not its elimination. Proposed Section 15.12(c) cre- ates a seven-day redemption extension triggered when redemption demands exceed ten percent o — outstanding issuance within a twenty- — our-hour window, providing breathing room to liquidate Treasuries or await FDIC resolution. Together, these provisions sub- stantially reduce the probability that a single traditional bank — ailure will cause an imme- diate and total reserve — reeze o — the kind that occurred during the SVB event. What these provisions do not—and structurally cannot—address is the DeFi deriva- tive-market cascade that — ollows even a brie — stablecoin depeg. A stablecoin that trades at $0.87 — or twenty- — our hours triggers automated liquidations in DeFi collateral markets regardless o — whether the issuer’s reserve position is ultimately restored. The derivative- market cascade operates through the secondary-market price o — the stablecoin, not through the issuer’s balance sheet, and it lands in markets over which the OCC has no jurisdiction. The NPRM contains no mechanism — or coordinating with the CFTC when a reserve stress event triggers derivative market cascades.34 It does not cite the CLARI- TY Act.35 The Act’s inter-agency coordination provisions are similarly limited in scope. Section 15 mandates annual reports — rom primary regulators and FSOC, providing a macropru- dential monitoring — ramework. 36 The Stablecoin Certi — ication Review Committee in-

33 The SVB shock illustrates the problem with precision. A stablecoin issuer holding a signi

icant

portion o

reserves at a single bank that subsequently — ails is not in violation o — any reserve requirement in the current GENIUS — ramework so long as the nominal dollar value o — the reserve account is covered by FDIC insurance or FDIC receivership. The degradation occurs not in the accounting balance but in the liquidity timeline: reserves that are — rozen pending receivership proceedings are — unctionally unavailable — or same-day redemption. GENIUS does not address this timing gap, and the OCC NPRM’s concentration limits and redemption circuit breaker, while reducing single-institution exposure, do not extend to the DeFi derivative markets where a temporary depeg immediately registers as collateral short — all. See OCC NPRM, supra note 11 (proposing concentration limits under proposed Section 15.11(c) and a redemption extension under proposed Section 15.12(c), but containing no provision addressing CFTC-regulated derivative markets). 34 OCC NPRM, supra note 11, at 14,031 (addressing coordination with state regulators and the Federal

Reserve

or dual-chartered banks, but making no re — erence to CFTC coordination in the event o — a reserve stress event). 35 The OCC NPRM does not cite the CLARITY Act even once. See generally OCC NPRM, supra note

1. This omission is signi

   icant: the NPRM was issued on March 2, 2026, a — ter CLARITY had been under congressional consideration — or over a year, suggesting that the OCC does not currently view CLARITY’s commodity classi — ication — ramework as relevant to its stablecoin reserve supervision. 36 GENIUS Act Section 15(a) (requiring the primary — ederal payment stablecoin regulator to submit

annual reports to Congress on systemic risks); Section 15(b) (directing FSOC to incorporate those reports into its annual systemic risk review). The Act does not, however, establish any mechanism — or real-time inter-agency coordination during a stress event. 2026-03-17] 11

cludes Treasury, the Fed, and the OCC.37 The CFTC is not represented on that commit- tee, despite holding jurisdiction over the derivative markets through which a large share o — crosstagion propagates. The FSOC reporting mechanism is retrospective by design; it documents systemic risks that have already materialized, not risks that are propagating in real time.

B. The CLARITY Act’s Commodity Classi

ication Framework The CLARITY Act resolves a decade o — legal uncertainty about the regulatory classi-

ication o — digital assets by creating a comprehensive “digital commodity” category. Un- der Section 201, a digital asset that operates on a — unctional, decentralized network quali-

ies as a digital commodity, and the CFTC receives exclusive jurisdiction over its spot market.38 Section 301 extends that jurisdiction to all derivatives re — erencing the digital commodity, including the perpetual — utures contracts that serve as the primary vehicle

or leveraged DeFi exposure to stablecoin prices.39 For the crosstagion analysis, the CLARITY Act’s most important provision is the mutual exclusion clause it inserts into the GENIUS — ramework. Section 401 speci — ies that a payment stablecoin compliant with GENIUS is not a digital commodity — or CFTC purposes. The intent was to prevent dual registration: a GENIUS-compliant stablecoin should not need to register with the CFTC as a commodity simply because it trades on decentralized exchanges. The provision achieves that goal, but it creates an unintended consequence in the stress context.40 When a stablecoin breaks its peg, even temporarily, its GENIUS compliance status becomes ambiguous. An asset that is trading at $0.87 rather than $1.00 may no longer quali — y as a “payment stablecoin” under the Act’s de — initional provisions, which re — er- ence an asset designed to “maintain a consistent 1:1 value.” I — the stablecoin loses its GENIUS compliance classi — ication, even temporarily, it — alls into the digital commodity

37 GENIUS Act Section 3(c). The Committee’s membership (Treasury, the Federal Reserve, and the

OCC) re

lects the Act’s — ocus on the banking system as the relevant regulatory — rame o — re — erence. The CFTC’s omission is not an oversight; it is a structural arti — act o — designing the statute around the

orward channel, in which the OCC-supervised issuer is the origin o — risk, rather than the reverse channel, in which the CFTC-supervised derivative markets are the destination o — the cascade. 38 CLARITY Act Section 201 (de — ining “digital commodity” to include any digital asset that operates

on a

unctional, decentralized network and granting the CFTC exclusive jurisdiction over the spot market — or such assets); Section 203 (providing that a digital asset certi — ied as a digital commodity by the issuer retains that classi — ication unless the SEC a —

irmatively determines otherwise). 39 Id. Section 301 (assigning CFTC jurisdiction over digital commodity derivatives, including perpetual

utures and options contracts); see also Commodity Exchange Act Section 2(a)(1)(A), 7 U.S.C. Section 2(a)(1)(A) (2025) (granting CFTC exclusive jurisdiction over — utures contracts and swap agreements re — erencing commodities). 40 See GENIUS Act Section 17 (exempting GENIUS-compliant payment stablecoins — rom securities

registration requirements); CLARITY Act Section 401 (establishing that a digital asset that quali

ies as a payment stablecoin under GENIUS is not a digital commodity — or CFTC purposes). This mutual exclusion clause was inserted in late-stage con — erence negotiations and was intended to prevent dual registration. It has the unintended consequence o — creating a classi — ication cli —

: a stablecoin that loses its GENIUS compliance under stress ( — or example, by temporarily breaking its peg) — alls into either the securities category or the commodity category, and no agency has been designated to make that determination in real time. 12 Crosstagion

category, triggering CFTC jurisdiction over its spot market at precisely the moment when the OCC is attempting to manage the issuer’s reserve situation.41 The CLARITY Act also does not address what happens in the derivative markets when a reserve stress event occurs. Section 301 grants the CFTC jurisdiction over digital commodity derivatives, but it does not require the CFTC to coordinate with the OCC when those derivative markets are reacting to an OCC-supervised event.42 The CFTC’s traditional tools — or managing derivative market stress—position limits, emergency liqui- dation orders, and trading halts—can be deployed against exchange operators and large traders. They cannot be deployed against the DeFi protocols that now hold a substantial share o — stablecoin derivative open interest, because those protocols are smart contracts, not registered intermediaries.

C. The SEC’s Residual Howey Authority The GENIUS Act and CLARITY Act both preserve the SEC’s authority to classi — y any digital asset as a security under the investment contract test established in S.E.C. v. W.J. Howey Co., 328 U.S. 293, 298–99 (1946). Under Howey, an instrument is a security i —

it involves an investment o

money in a common enterprise with a reasonable expecta- tion o — pro — it derived — rom the e —

orts o — others. The SEC’s longstanding position is that a reserve-backed stablecoin trading at par is not a security: a holder who expects exactly $1.00 in redemption value has no expectation o — pro — it. A depegged stablecoin presents a materially di —

erent posture. A stablecoin that traded at par yesterday but trades at $0.87 today occupies the most ambiguous region o — the Howey analysis. A purchaser at $0.87 holds an instrument whose recovery to par depends on the issuer’s actions to restore its reserves; this is a contingen- cy that resembles an expectation o — pro — it — rom another’s e —

orts more than a payment transaction. The SEC has applied this economic-reality — raming to distressed digital in- struments in prior en — orcement actions. Critics o —

er two replies: the expected gain is recovery to par, not appreciation above it; and stablecoin holders do not pool — unds or share in issuer pro — its as a common enterprise conventionally requires. The theory has not been tested in the speci — ic context o — a reserve-backed depeg, and a reviewing court might reject it. But the SEC’s demonstrated en — orcement posture makes the threat con- crete. An SEC en — orcement action asserting unregistered-security status during a de- peg—even i — ultimately unsuccess — ul—would introduce litigation-driven asset — reezes, registration demands, and adversarial discovery into a stabilization e —

ort that requires coordinated operational decisions at speed. The standstill clause proposed in Part III must bind the SEC as a — ull party, not an a — terthought.

41 This scenario is not hypothetical. USDC brie

ly depegged in March 2023. Had the depeg persisted

or more than twenty- — our hours, legal uncertainty about its classi — ication would have hampered both OCC and CFTC responses. See supra notes 8–10 and accompanying text. 42 See Financial Stability Oversight Council, Guidance on Nonbank Financial Company Determinations

(Nov. 2023) (establishing a multi-stage process

or SIFI designation that includes preliminary analysis, a notice-and-comment period, a hearing opportunity, and a — inal determination, with an estimated timeline o — twelve to eighteen months — rom initiation to completion). The designation process presupposes that the systemic risk to be addressed has been identi — ied prospectively, not that a crisis is already propagating at blockchain speed. 2026-03-17] 13

D. The Coordination Gap: An Unowned Boundary The jurisdictional gap can be stated precisely. When a reverse crosstagion event oc- curs, three agencies hold colorable authority over distinct aspects o — a single cascade: the OCC holds jurisdiction over the stablecoin issuer and its reserve assets; the CFTC holds jurisdiction over the derivative markets where the cascade propagates; and the SEC may claim residual jurisdiction i — the stablecoin’s depeg causes it to be reclassi — ied as a securi- ty under the investment contract test. No statute designates a lead agency among them, and no mechanism assigns primacy in real time.43 The nearest statutory mechanism — or resolving such con — licts—the FSOC designation process under Dodd-Frank Section 113—operates on a timescale o — months, not hours.44 The Dodd-Frank Act’s response to the 2008 — inancial crisis illustrates both the tem- plate and its limits. The AIG — ailure exposed a similar gap between the O —

ice o — Thri — t Supervision, which supervised AIG’s holding company, and the Federal Reserve, which supervised its bank subsidiaries.45 Dodd-Frank’s response was not new prudential re- quirements but a new inter-agency coordination body: the FSOC, established under Sec- tion 112 with authority to designate systemically important — inancial institutions46 and, under Section 119, to — acilitate in — ormation sharing and coordination among member agencies.47

43 The absence o

a lead-agency designation is not merely an administrative gap; it has substantive

consequences. Under current law, each o

the three agencies may independently initiate an en — orcement action, issue emergency orders, or request court relie — without coordinating with the others. See Dodd-Frank Act Section 119, 12 U.S.C. Section 5329 (2025) (authorizing but not requiring FSOC to — acilitate coordination); 15 U.S.C. Section 78u (2025) (authorizing SEC en — orcement independent o — any inter-agency process); 7 U.S.C. Section 13a-1 (2025) (authorizing CFTC en — orcement independent o — any inter-agency process). The result is that during a live crosstagion event, competing agency actions are not only possible but legally authorized. 44 The existing inter-agency coordination model most relevant to the crosstagion gap is the FSOC

designation process under Dodd-Frank Act Section 113, 12 U.S.C. Section 5323 (2025), which authorizes FSOC to designate non-bank — inancial companies as systemically important — inancial institutions (SIFIs), triggering enhanced Federal Reserve supervision. While FSOC designation is theoretically available — or stablecoin issuers, the process is designed — or prospective risk identi — ication, not real-time crisis coordination. FSOC has not used its SIFI designation authority since 2021. 45 The 2008 — inancial crisis produced a similar jurisdictional gap between the O —

ice o — Thri — t

Supervision, which regulated AIG’s holding company, and the Federal Reserve, which regulated its bank subsidiaries, creating uncertainty about which agency bore primary responsibility — or AIG’s credit de — ault swap port — olio. The lesson the Dodd-Frank Act drew was not to add new prudential requirements to CDS issuers but to designate a systemic risk oversight body (FSOC) with cross- agency coordination authority. The crosstagion problem calls — or the same analytical move applied to the OCC-CFTC boundary. 46 Dodd-Frank Act Section 112, 12 U.S.C. Section 5322 (2025) (establishing FSOC and authorizing it

to designate nonbank

inancial companies — or enhanced Federal Reserve supervision under Section 113); Financial Stability Oversight Council, Annual Report 2023, at 9 (noting that FSOC rescinded all prior SIFI designations and had made no new nonbank designations since 2021 under revised designation guidance). 47 See generally Dodd-Frank Wall Street Re — orm and Consumer Protection Act Section 119, 12 U.S.C.

Section 5329 (2025) (authorizing FSOC to “

acilitate in — ormation sharing and coordination among the member agencies”); Section 120, 12 U.S.C. Section 5330 (authorizing FSOC to recommend prudential standards to primary — inancial regulators). These authorities are advisory and prospective; they do not create a mechanism — or real-time jurisdictional primacy determination during a live crisis. 14 Crosstagion

 FSOC is not, however, well-suited to the crosstagion problem as it currently oper- ates. The SIFI designation process is designed  --- or prospective risk identi --- ication; it is not a real-time crisis management tool.48 The statute’s coordination authorities are advisory, not binding. And FSOC has not used its designation authority since 2021. A crosstagion cascade that propagates  --- rom a bank  --- ailure through a stablecoin depeg into DeFi deriva- tive markets within hours does not wait  --- or FSOC to convene a meeting.
 The Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo compounds the jurisdictional gap identi --- ied above. By overruling Chevron U.S.A., Inc. v. Natural Re- sources De --- ense Council, the Court shi --- ted interpretive authority over ambiguous statutory provisions  --- rom expert agencies to the  --- ederal judiciary. The practical consequence  --- or crosstagion regulation is signi --- icant: neither the OCC nor the CFTC can rely on a court to de --- er to its own reading o ---  whether GENIUS, the CLARITY Act, or Dodd-Frank Section 119 grants it authority to intervene in a stress event that crosses the reserve- asset-to-derivative-market boundary. Prior to Loper Bright, an agency acting under an am- biguous but plausible statutory mandate during a  --- inancial crisis could be reasonably con --- ident that a reviewing court would sustain its interpretation. That con --- idence is no longer warranted. An OCC emergency directive issued during a USDC depeg event, or a CFTC trading halt on stablecoin perpetual  --- utures justi --- ied by a broad reading o ---  the Commodity Exchange Act, will now be reviewed de novo by a generalist court that owes no de --- erence to the agency’s considered view o ---  its own jurisdiction. This increases the legal  --- ragility o ---  any agency-led, unilateral response to a crosstagion event and rein --- orces, with urgency, the argument developed in Part III: coordination authority must be grounded in explicit statutory text, not in agencies’ own interpretations o ---  implied pow- ers.49

Part III: A Coordination Mechanism

or Crosstagion Part II established that the jurisdictional gap is structural: it arises — rom assigning regulatory authority to distinct agencies without speci — ying how those authorities interre- late when stress propagates across their boundaries. The instinctive regulatory re- sponse—more prudential requirements on stablecoin issuers—cannot close a gap that originates in traditional banking and propagates through a channel that balance-sheet regulation does not reach. A di —

erent kind o — intervention is required: a pre-authorized,

48 The CFTC’s Market Risk Advisory Committee (MRAC), established under the Federal Advisory

Committee Act, has a Digital Assets Subcommittee that has published guidance on DeFi risk. The OCC’s Bank Supervision Policy division oversees the OCC’s implementing regulations — or GENIUS- chartered stablecoin issuers. Both bodies have participated in FSOC’s inter-agency working groups on digital asset systemic risk. Neither has a standing mandate to noti — y the other when stress indicators are met. 49 Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024) (overruling Chevron U.S.A., Inc. v. Natural Res.

De

. Council, 467 U.S. 837 (1984), and holding that courts must exercise independent judgment when construing the scope o — agency authority under ambiguous statutory provisions). The post-Loper Bright regime creates particular di —

iculties — or inter-agency coordination mechanisms that are grounded in agencies’ own constructions o — their enabling statutes, because any such construction is now subject to de novo judicial review. See also Peter Conti-Brown & Sean Vanatta, Risk, Discretion, and Bank Supervision, 130 COLUM. BUS. L. REV. (2025) (discussing post-Loper Bright implications — or — inancial- agency coordination and emergency powers). 2026-03-17] 15

trigger-based mechanism that assigns jurisdictional primacy be

ore a crisis crosses agency lines, binds all three agencies whose claims would otherwise compete during a depeg event, and — reezes the classi — ication ambiguity that GENIUS and CLARITY inadvertent- ly create under stress. Section A explains why prudential tools cannot solve the problem. Section B surveys the statutory authority that already exists — or the mechanism. Section C speci — ies the mechanism’s components. Section D addresses three objections to the proposal that, i — le — t unanswered, would undermine con — idence in the mechanism’s workability.

A. Why New Prudential Requirements Are Insu

icient The instinctive regulatory response to a newly identi — ied systemic risk is to impose new prudential requirements on the institutions that originate it. For the crosstagion problem, that instinct leads in the wrong direction. The reverse channel does not origi- nate in stablecoin issuers; it originates in traditional banks and Treasury markets. Impos- ing additional reserve requirements on stablecoin issuers would not have prevented the SVB cascade; Circle’s reserves were invested in exactly the assets GENIUS would re- quire. What — ailed was not the reserve composition; it was the liquidity timeline and the absence o — a coordinated agency response.50 The macroprudential literature — rames this as the di —

erence between micro- prudential and macro-prudential regulation.51 GENIUS is a micro-prudential statute: it regulates individual stablecoin issuers and their balance sheets. The crosstagion gap is a macro-prudential problem: it concerns the transmission o — stress between the banking system and the DeFi ecosystem through the stablecoin channel. Closing that gap re- quires a cross-agency coordination mechanism, not higher capital ratios. An additional prudential argument — ails on its own terms — or the DAO governance problem. No reserve requirement can prevent a — lash loan governance attack. No capital ratio can protect against a thirteen-second exploit that drains a protocol’s treasury be — ore any human has reacted. The DAO transmission mechanism is — undamentally di —

erent

rom the reserve degradation mechanism, and it requires an en — orcement response cali- brated to its speed, not a prudential response designed — or balance sheet management.

50 Each indicator is publicly veri

iable without new data-collection in — rastructure. Stablecoin prices

trade continuously on public exchanges including Coinbase, Kraken, and Binance, with real-time data available through providers including Kaiko and CoinGecko. Perpetual — utures open interest data is published by major derivatives exchanges including the Chicago Mercantile Exchange and dYdX. Governance token holdings are readable directly — rom on-chain wallet addresses on public blockchains. A regulatory monitoring system based on these data sources could be operational within ninety days o — issuance o — an implementing MOU. 51 The — inancial stability literature uses the term “macroprudential gap” to describe regulatory

rameworks that supervise individual institutions adequately but — ail to address systemic transmission. See Charles Goodhart & Anil Kashyap, The Macroprudential Stance, in THE NEW PALGRAVE DICTIONARY OF ECONOMICS (2017). THE CROSSTAGION GAP IDENTIFIED IN THIS ARTICLE IS A SPECIES OF MACROPRUDENTIAL GAP: GENIUS REGULATES STABLECOIN ISSUERS; CLARITY REGULATES DIGITAL COMMODITY MARKETS; NEITHER ADDRESSES THE TRANSMISSION CHANNEL BETWEEN THEM. 16 Crosstagion

B. Existing Models

or Inter-Agency Coordination Two existing models are relevant to the coordination mechanism proposed here. The — irst is the Federal Reserve’s emergency lending authority under Section 13(3) o — the Federal Reserve Act.52 During the 2023 banking stress, the Fed invoked 13(3) to create the Bank Term Funding Program within days, deploying a pre-authorized — acility that had been designed in advance — or exactly this kind o — stress event. The critical — eature was pre-authorization: Congress had already granted the authority, the Fed had already designed the mechanism, and deployment required only a determination that the trigger- ing conditions were met. A crosstagion coordination mechanism should be designed with the same architecture. The second model is Dodd-Frank Section 119, which authorizes FSOC to “ — acilitate in — ormation sharing and coordination among the member agencies.”53 This authority has been used primarily — or in — ormation-sharing memoranda and periodic joint examina- tions. It has not been used to create a binding primacy designation mechanism, but the inter-agency MOU — orm is well-established: the Federal Reserve and the CFTC executed a coordination MOU in 2012 to govern joint supervision o — designated — inancial market utilities, demonstrating that binding cross-agency coordination protocols can be built on existing statutory — oundations without new legislation. That is a gap in implementation, not in statutory authority. An MOU among the OCC, CFTC, and SEC, authorized un- der Section 119 and codi — ying the primacy rules proposed in Section C below, could be put in place without new legislation. A statutory amendment would be substantially more durable: as Part II.D established, Loper Bright Enterprises v. Raimondo subjects an MOU resting on the agencies’ own statutory interpretations to de novo judicial review, and a court examining whether Section 119 authorizes binding primacy designation—rather than the advisory in — ormation-sharing the provision has historically supported—may conclude that it does not.

52 The Federal Reserve’s emergency lending authority under 13(3) o

the Federal Reserve Act, 12

U.S.C. Section 343 (2025), provides a partial model. During the 2023 banking stress, the Fed invoked 13(3) to create the Bank Term Funding Program within days. A crosstagion coordination mechanism could be modeled on this: a standing designation — ramework, pre-authorized by statute, that identi — ies which agency assumes primacy over a crosstagion event based on where the stress originates. 53 The legal mechanism — or binding the SEC to the standstill is Section 119 o — Dodd-Frank, which

authorizes FSOC to

acilitate coordination among all member agencies, including the SEC. See 12 U.S.C. Section 5329 (2025). The inter-agency MOU — orm has been used success — ully in the — inancial regulatory context. See Memorandum o — Understanding Between the Board o — Governors o — the Federal Reserve System and the Commodity Futures Trading Commission Regarding Coordination in Areas o — Common Regulatory Interest (July 2012), https://www.c — tc.gov/sites/de — ault/ — iles/idc/groups/public/@lr — ederalregister/documents/ — ile/201 2-18709a.pd — (establishing binding coordination protocols — or joint supervision o — designated — inancial market utilities). A tri-agency MOU signed by the OCC, CFTC, and SEC, and activated by the FSOC Chair, would bind the SEC to the standstill under its own consent to the MOU and under the FSOC’s coordination authority. An SEC en — orcement action initiated a — ter the standstill is declared would be subject to a motion to stay on the ground that it inter — eres with a coordinated — ederal emergency response. See generally In re Vioxx Prods. Liab. Litig., 501 F. Supp. 2d 789, 805 (E.D. La. 2007) (staying parallel en — orcement action during coordinated — ederal regulatory response). 2026-03-17] 17

The CFTC’s Market Risk Advisory Committee and the OCC’s Bank Supervision Policy division represent the organizational homes  --- or the mechanism. 54 Both bodies have existing liaison relationships through FSOC. What is missing is the statutory trigger that converts those relationships into binding coordination obligations when crosstagion stress indicators are met.

C. The Proposed Mechanism: Triggered Primacy Designation The coordination mechanism proposed here has three components: observable stress indicators, a primacy determination rule, and a cross-noti — ication obligation. The stress indicators should be objective, observable in real time through public blockchain data and market — eeds, and require no new regulatory data in — rastructure.55 Three categories o — indicator are su —

icient — or initial implementation, each correspond- ing to a distinct mechanism o — crosstagion propagation documented in Part I. The — irst category is a sustained secondary-market depeg: a reserve-backed stablecoin trading be- low peg on major exchanges — or a sustained period. Secondary-market pricing is the re — - erence value that DeFi protocols use — or collateral calculations, and a depeg is there — ore the leading indicator o — the collateral liquidation cascade that Part I documented. The second category is a rapid decline in derivative-market open interest re — erencing the sta- blecoin. Open interest contraction signals the — orced unwinding o — leveraged positions that ampli — ies secondary-market price pressure into a sel — -rein — orcing loop. The third category is a governance token concentration event: a single address accumulating a con- trolling share o — outstanding governance tokens in a protocol that holds or intermediates stablecoin reserves. Governance concentration is the structural precondition — or the

lash loan exploits that Part I.B analyzed, and its observability on public blockchains makes it a — easible early-warning indicator. Each category is independently observable through existing public data sources. The speci — ic trigger thresholds—the percentage depeg, the duration, the percentage decline in open interest, the concentration ratio—are empirical questions that the implementing agencies should calibrate through notice-and- comment rulemaking in — ormed by the empirical record o — prior stress events, including the magnitudes documented in Part I.

54 The CFTC’s Market Risk Advisory Committee (MRAC) and the OCC’s Bank Supervision Policy

division represent the natural organizational homes

or the coordination mechanism proposed here. Both bodies have existing liaison relationships through FSOC. What is missing is a statutory trigger that converts those liaison relationships into binding coordination obligations when crosstagion stress indicators are met. 55 Each indicator category is publicly veri — iable without new data-collection in — rastructure. Stablecoin

prices trade continuously on public exchanges including Coinbase, Kraken, and Binance, with real- time data available through providers including Kaiko and CoinGecko. Perpetual — utures open interest data is published by major derivatives exchanges including the Chicago Mercantile Exchange and dYdX. Governance token holdings are readable directly — rom on-chain wallet addresses on public blockchains. See supra notes 16–19 and accompanying text (documenting the magnitudes observed during the March 2023 USDC depeg across each indicator category). 18 Crosstagion

 The primacy determination rule assigns lead-agency status based on the origin o ---  the stress.56 I ---  the stress event originates in the reserve asset layer (speci --- ically, a bank  --- ailure, a Treasury market disruption, or a custodial  --- ailure) the OCC assumes jurisdictional pri- macy over the stablecoin issuer and must noti --- y the CFTC within one hour. I ---  the stress event originates in the on-chain governance layer (speci --- ically, a  --- lash loan attack, a smart contract exploit, or a governance token concentration event) the CFTC assumes jurisdic- tional primacy over the derivative markets and must noti --- y the OCC within one hour. The non-primary agency retains its baseline jurisdiction but de --- ers to the primary agency on emergency remediation decisions  --- or the duration o ---  the stress event, de --- ined as the period during which any o ---  the triggering indicators remain active.
 The cross-noti --- ication obligation closes the in --- ormation gap that allowed the SVB cascade to propagate into DeFi without any agency alert. Under the current  --- ramework, the FDIC’s appointment o ---  a receiver does not trigger any noti --- ication obligation to the CFTC, even though the FDIC is  --- ully aware that stablecoin issuers hold deposits at the

ailed bank and that those deposits are integral to derivative market stability. A cross- noti — ication obligation, requiring the OCC to alert the CFTC within one hour o — any re- serve stress event meeting the trigger thresholds, would allow the CFTC to deploy its emergency market powers (position limits, trading halts, emergency liquidation orders) be — ore the cascade has propagated — ully into derivative markets. The classi — ication cli —

created by GENIUS Section 17 and CLARITY Section 401 requires a — ourth component: a tri-agency classi — ication standstill. As Part II.C estab- lished, a depegged stablecoin may satis — y the Howey investment contract test at precisely the moment o — maximum market stress, vesting the SEC with colorable jurisdiction just when the OCC and CFTC must act without interruption. A standstill clause limited to the OCC-CFTC binary—treating the stablecoin as either a payment stablecoin or a digi- tal commodity — or the duration o — the stress event—leaves the most operationally dis- ruptive o — the three possible interventions unconstrained.57 The standstill clause should there — ore be tri-agency in scope: — or the duration o — a declared stress event, the stable- coin’s pre-event regulatory classi — ication is — rozen against all three agencies. The SEC is precluded — rom initiating new en — orcement actions asserting securities jurisdiction over

56 The primacy rule would operate as

ollows: i — the stress event originates in the reserve asset (a bank

ailure, a Treasury market disruption), the OCC assumes jurisdictional primacy over the stablecoin issuer and noti — ies the CFTC within one hour. I — the stress event originates in the on-chain governance layer (a — lash loan attack, a smart contract exploit), the CFTC assumes jurisdictional primacy over the derivative markets and noti — ies the OCC within one hour. In both cases, the non- primary agency retains its baseline jurisdiction but de — ers to the primary agency on emergency remediation decisions. This rule does not require new legislation; it can be implemented through a memorandum o — understanding authorized under Dodd-Frank Section 119. 57 The legal authority — or a tri-agency standstill binding the SEC rests on two independent grounds.

First, the SEC, as an FSOC member under Dodd-Frank Section 112, is subject to FSOC’s coordination authority under Section 119; an MOU executed with FSOC’s — acilitation would bind the SEC in its capacity as a member agency. Second, the Securities Exchange Act o — 1934 Section 36, 15 U.S.C. Section 78mm (2025), authorizes the SEC to grant exemptions — rom any provision o — the Act by rule, regulation, or order, conditioned on any terms the SEC deems necessary. An SEC order granting a time-limited exemption — rom registration requirements — or a stablecoin undergoing an FSOC-declared stress-event review would be within the SEC’s existing statutory authority without the need — or new legislation. 2026-03-17] 19

the stablecoin issuer or the stablecoin itsel

. The OCC retains its GENIUS-derived su- pervisory authority over the issuer. The CFTC retains its CLARITY-derived jurisdiction over derivative markets. Neither the OCC’s nor the CFTC’s emergency actions may be delayed, enjoined, or otherwise disrupted by a subsequently initiated SEC en — orcement proceeding. The standstill expires upon the primary agency’s certi — ication that all trigger- ing indicators have resolved, or a — ter thirty days, whichever is earlier; a hard outer limit prevents the mechanism — rom — unctioning as a permanent exemption — rom SEC over- sight.58 Centralized activation authority resolves the threshold problem o — who declares that a stress event has begun. The standstill should be activated by the FSOC Chair upon certi — ication by either the OCC Comptroller or the CFTC Chair that one or more o — the observable stress indicators identi — ied above have been met. FSOC Chair activation, ra- ther than unilateral agency declaration, ensures that the standstill is not used opportunis- tically to insulate an agency’s pre — erred regulatory position — rom SEC review in non- crisis circumstances, while still permitting rapid deployment when the triggering condi- tions are objectively satis — ied. The mechanism does not require new legislation, though legislation would provide greater certainty. The OCC, CFTC, and SEC have authority under existing law to enter into a tri-agency MOU establishing these coordination obligations, with FSOC as the activating body under Dodd-Frank Section 119. Dodd-Frank Section 119 provides FSOC the authority to — acilitate precisely this kind o — coordination among member agencies. 59 The Bank Secrecy Act, the Commodity Exchange Act, the National Bank Act, and the Securities Exchange Act each contain general coordination authorities that could support the noti — ication and standstill obligations proposed here. A statutory codi-

ication, ideally through an amendment to either GENIUS or the Commodity Exchange Act that expressly binds the SEC to the standstill rule, would be pre — erable because it would give the mechanism the permanence and clarity that an MOU lacks, and because Loper Bright Enterprises v. Raimondo has substantially elevated the litigation risk attending any agency coordination mechanism that depends on a court’s acceptance o — the agen- cies’ own interpretations o — their enabling statutes. The urgency o — the crosstagion prob- lem does not require waiting — or the next legislative cycle, but the post-Loper Bright legal environment provides an additional a —

irmative reason to pursue a statutory amendment rather than treating it merely as a supplement to agency action.

58 The standstill operates prospectively only: it precludes new en

orcement actions and new

registration demands initiated a

ter the standstill is declared. It does not stay, dismiss, or otherwise a —

ect any SEC en — orcement action that was pending be — ore the standstill declaration. This limitation preserves the SEC’s en — orcement rights while preventing a newly initiated action — rom disrupting the emergency coordination in progress. 59 A statutory codi — ication would also resolve a dra — ting ambiguity in the current Dodd-Frank

ramework. Section 119 authorizes FSOC to “ — acilitate” coordination among member agencies but does not explicitly authorize FSOC to issue binding directives. A statutory amendment expressly authorizing the FSOC Chair to activate a classi — ication standstill upon certi — ication o — speci — ied stress indicators would resolve any ambiguity about whether Section 119 supports that speci — ic — unction, and would simultaneously satis — y the Loper Bright Enterprises v. Raimondo requirement that agency authority rest on explicit statutory text rather than implied powers. See Loper Bright Enters. v. Raimondo, 603 U.S. 369, 392–93 (2024). 20 Crosstagion

D. Addressing Three Objections Three objections to the proposed mechanism warrant explicit treatment. The — irst is that coordinating a regulatory response creates moral hazard by signaling that a crossta- gion event will trigger a government backstop, reducing issuers’ incentives to maintain genuinely diversi — ied reserves. The objection misunderstands the mechanism’s — unction. The mechanism does not prevent depegs, absorb losses, or protect issuers — rom reserve mismanagement. Circle’s exposure to SVB was not illegal; it was imprudent, and GE- NIUS’s prudential requirements address that problem directly. The coordination mecha- nism addresses the regulatory response to a depeg, not the underlying behavior that caused it. Issuers remain subject to GENIUS’s reserve requirements and attestation ob- ligations and remain liable in insolvency — or any reserve short — all. A mechanism that pre- vents three agencies — rom issuing con — licting emergency orders during a crisis does not make reserve concentration sa — er; it makes the a — termath less chaotic. The second objection is that the classi — ication standstill in — ringes on the SEC’s core statutory authority to protect investors. The standstill’s reach is more limited than this objection assumes. It is temporary, capped at thirty days. It operates prospectively only: pending SEC en — orcement actions are una —

ected. The SEC retains — ull authority to in- vestigate and gather evidence throughout the standstill period and — ull en — orcement au- thority once the standstill expires. As Part II.C established, the SEC’s Howey claim in the reserve-backed depeg context is contested on the merits. De — erring a disputed classi — ica- tion decision until a — ter the crisis imposes no meaning — ul cost on investor protection when the alternative is an en — orcement action that introduces asset — reezes and registra- tion demands into an ongoing stabilization e —

ort. The third objection is that no mechanism operating on a one-hour noti — ication time- line can address cascades that propagate at blockchain speed. This objection is correct on the premise but beside the point on the conclusion. The mechanism is not designed to halt liquidations in real time or to prevent DeFi protocols — rom executing their smart contract logic. Nothing can do that. It is designed to prevent three agencies — rom taking con — licting regulatory actions that compound the stress: issuing contradictory emergency orders, asserting competing jurisdiction over the same issuer, or introducing adversarial litigation into a stabilization e —

ort. Those are human-speed coordination — ailures that a one-hour timeline can prevent. The SVB-USDC event un — olded over seventy-two hours

rom Circle’s initial disclosure to the FDIC’s backstop announcement. Even a one-hour head start on coordinated agency action would have been su —

icient to avoid the worst regulatory con — licts. The mechanism cannot stop a — lash loan exploit in thirteen seconds. What it can stop is the three-way jurisdictional contest among the OCC, the CFTC, and the SEC that would — ollow.

Conclusion The GENIUS Act and the CLARITY Act together represent the most signi — icant

ederal regulation o — digital assets in U.S. history. They will meaning — ully reduce the sys- temic risks that the stablecoin market has historically posed to traditional — inance. They 2026-03-17] 21

will not, however, prevent the next SVB cascade, because they were designed to address the — orward channel o — crosstagion and leave the reverse channel unaddressed. The reverse channel is not a theoretical risk. It is a documented phenomenon with a clear empirical record, a well-understood mechanism, and a speci — ic jurisdictional gap that this Article has identi — ied and mapped. When traditional — inancial stress destabilizes payment stablecoin reserves, the cascade into decentralized markets — alls between the OCC’s jurisdiction over the issuer, the CFTC’s jurisdiction over the derivative markets, and the SEC’s potential en — orcement jurisdiction over a depegged instrument that may satis — y the Howey investment contract test. No statute assigns lead-agency responsibility. No mechanism triggers coordination. And the three-way jurisdictional contest among these agencies, i — it materializes in real time, will compound rather than contain the cas- cade. DAO governance — ailure can accelerate the underlying crisis to blockchain speed, exhausting all available en — orcement tools be — ore any agency has received its — irst alert. The solution is not more prudential requirements. It is a pre-designated inter-agency coordination mechanism, triggered by observable stress indicators, that assigns jurisdic- tional primacy be — ore a crisis rather than a — ter. The legal authority — or that mechanism already exists. What is missing is an executed tri-agency MOU—activated by the FSOC Chair upon certi — ication o — the stress indicators this Article has identi — ied—be — ore the next reverse crosstagion event — orces three agencies into jurisdictional competition dur- ing a live cascade. The author has submitted a comment letter to the OCC in the GE- NIUS Act implementing rulemaking, applying the crosstagion — ramework developed here to — ive speci — ic questions in the NPRM and recommending secondary-market monitoring requirements, crosstagion stress testing, simultaneous-stress scenario analy- sis, governance risk assessment, and inter-agency noti — ication through FSOC.60

60 Seth C. Oranburg, Comment Letter on Implementing the Guiding and Establishing National Innovation

or

U.S. Stablecoins Act

or the Issuance o — Stablecoins by Entities Subject to the Jurisdiction o — the O —

ice o — the Comptroller o — the Currency, Docket ID — orthcoming (on — ile with the O —

ice o — the Comptroller o — the Currency), https://www.regulations.gov (applying the crosstagion — ramework to OCC NPRM Questions 86, 109, 117, 119, and 147–148).