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

Abstract

The GENIUS Act's prudential framework protects against systemic risk that flows in one direction: from stablecoin failure into traditional banking risk. The empirical record of crosstagion, the bidirectional contagion between traditional finance and decentralized finance, demonstrates that the transmission channel runs the other way as well. When traditional financial stress destabilizes payment stablecoin reserves, as occurred when Silicon Valley Bank's failure briefly unpegged USD Coin in March 2023, the cascade into decentralized markets falls into a jurisdictional gap that neither GENIUS nor the CLARITY Act resolves. The Office of the Comptroller of 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 fall under 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 for assigning jurisdictional primacy before all three assert competing claims. DAO governance failure compounds the problem by creating a distinct transmission mechanism operating at blockchain speed, with no identifiable counterparty 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 classification standstill before a crisis rather than after.