Onigiri Weekend Digest: Institutional Lens #35

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Good weekend from Onigiri Capital.

This week’s Stablescope is about two forces moving in opposite directions but shaping the same market: stablecoins are scaling into a $300B+ financial rail, while regulators are realizing that the first generation of rules may already be outdated.

Recap this Week’s Headliners

SS #101 - How Stablecoins Tripled to $300B

Stablecoin supply has moved from a crypto-market liquidity tool into a meaningful financial market structure. The market has reached roughly the $300B range, supported by regulatory progress, institutional issuance, stronger crypto liquidity, and demand for dollar settlement rails outside traditional banking hours. The scale is now large enough that stablecoin reserves are increasingly relevant to the short-duration Treasury market; BIS research noted that stablecoin reserve positions in U.S. T-bills exceeded $150B as of late 2025.

SS #102 - EU Opens MiCA Review on Stablecoins

The European Commission has launched a consultation on the functioning of MiCA, with feedback open until 31 August 2026. The review covers whether the EU’s crypto-asset framework remains fit for purpose, including stablecoins, DeFi, token classification, supervision, and consumer trust.

The deeper message: stablecoins are no longer waiting for institutional adoption. They are forcing institutions and regulators to redesign the operating rules around them.

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The stablecoin market crossing the $300B threshold is not just a crypto-cycle milestone. It marks a transition from balance-sheet-light crypto liquidity to balance-sheet-relevant financial infrastructure.

The first phase of stablecoin adoption was driven by exchanges, offshore liquidity, and crypto-native trading. USDT became the dominant offshore settlement asset because it solved a simple but powerful problem: moving dollar value across venues, jurisdictions, and counterparties faster than the banking system.

The second phase is now being driven by regulated distribution. USDC, bank-linked stablecoins, tokenized money market products, and institutional payment rails are becoming more important because enterprises and financial institutions need compliance, auditability, and redemption assurance before they can use stablecoins for treasury, settlement, payouts, and cross-border payments.

That is why MiCA matters. Europe’s early regulatory framework gave the market clarity, but clarity alone does not guarantee competitiveness. If the rules are too restrictive, especially around yield, DeFi, and non-bank distribution, activity may simply move offshore. The European Commission’s early review suggests policymakers understand that MiCA cannot remain static while stablecoins evolve from crypto instruments into programmable deposit-like settlement assets.

The core institutional trend is clear: stablecoins are becoming the settlement layer between crypto markets, fintech rails, banks, corporates, and government securities markets.

Major Stablecoin Issuers

Winner

Scale advantages deepen. Large issuers benefit from network effects, liquidity, exchange integrations, reserve income, and regulatory lobbying power. However, concentration risk will attract heavier supervision.

Banks & Financial Institutions

Mixed

Banks gain opportunities in custody, reserves, tokenized deposits, settlement, and compliance services. But they also face margin pressure if stablecoins bypass correspondent banking and deposit rails.

Regulators

Mixed

Clearer rules increase market legitimacy, but regulators now need to manage stablecoins as payment infrastructure, money market participants, and potential systemic risk channels.

Corporates & Enterprises

Winner

Stablecoins improve cross-border settlement, supplier payouts, treasury mobility, and emerging-market dollar access. The main constraint remains compliance comfort and accounting treatment.

Retail Users & Crypto Natives

Mixed

Users benefit from cheaper, faster dollar access and broader utility. But yield restrictions, wallet controls, and stricter KYC may reduce the open-access benefits that made stablecoins popular.

Developers & Protocol Founders

Winner

Stablecoin growth expands the design space for payments, DeFi, payroll, B2B settlement, remittances, FX, treasury management, and programmable commerce.

Institutional Investors & VCs

Winner

The opportunity shifts from “which issuer wins” to infrastructure: compliance, orchestration, embedded wallets, FX routing, liquidity, tokenized assets, and institutional-grade settlement middleware.

Infrastructure & Service Providers

Winner

Custodians, KYC/KYB providers, reserve managers, auditors, chain analytics firms, payment processors, and fiat on/off-ramp providers become mission-critical vendors.

DAOs & Governance Communities

Loser / Mixed

As regulation tightens, loosely governed or anonymous stablecoin-adjacent protocols may face pressure. DAOs with real compliance, transparency, and risk controls may survive, but pure decentralization narratives weaken.

Exchanges & Market Infrastructure — CCPs / FCMs / ATSs

Winner

Exchanges benefit from deeper stablecoin liquidity, but regulated market infrastructure may capture the next phase as stablecoins enter securities settlement, tokenized collateral, and institutional clearing workflows.

The $300B stablecoin milestone is important because it reflects three structural shifts happening at the same time.

First, stablecoins are becoming a dollar distribution mechanism. In emerging markets, they serve as a practical substitute for expensive remittances, fragile local currencies, and limited banking access. In institutional markets, they are becoming a 24/7 settlement instrument for counterparties that need faster movement of value than correspondent banking can provide.

Second, stablecoins are becoming a Treasury market participant. Large issuers hold substantial reserves in cash, short-term Treasuries, repo-like instruments, and money market products. This means stablecoin growth creates incremental demand for short-duration government securities. Analysts have already linked future stablecoin growth to potentially significant T-bill demand, with Standard Chartered estimating that a much larger stablecoin market could translate into major new Treasury demand by 2028.

Third, stablecoins are creating a regulatory sequencing problem. Rules were designed when stablecoins were smaller and mostly crypto-native. Now, the market touches payments, securities, banking, money market funds, FX, DeFi, and consumer protection. MiCA’s review is therefore not a sign of regulatory failure; it is a sign that the market is moving faster than static legislation.

The EU’s interest-ban debate is especially important. If stablecoins cannot pass through yield, but tokenized money market funds, bank deposits, and offshore instruments can, then users will migrate to economically equivalent products outside MiCA’s original perimeter. The result may be less consumer protection, not more.

This is the central regulatory challenge:the more stablecoins look like money, the more they need supervision; but the more supervision makes them unattractive, the more activity migrates elsewhere.

For institutions, the next phase will be defined by four questions:

**Who controls the reserve asset?**The issuer, the bank, the fund manager, or a bankruptcy-remote structure?**Who owns the customer relationship?**Wallets, exchanges, banks, fintechs, or embedded enterprise platforms?**Who earns the economics?**Issuers, distributors, reserve managers, or infrastructure providers?**Who carries the systemic risk?**Users, issuers, banks, money markets, or central banks?

Stablecoin regulation is no longer only about crypto compliance. It is becoming a debate about who gets to issue, distribute, and monetize digital money.

The biggest mistake institutions can make is treating stablecoins as a subcategory of crypto. Stablecoins are better understood as programmable monetary infrastructure.

Crypto assets are investment products. Stablecoins are settlement products.

That distinction matters because the adoption path is different. Bitcoin and Ethereum are driven by investment demand, liquidity cycles, and market narratives. Stablecoins are driven by payment utility, currency demand, transaction speed, regulatory access, and institutional integration.

This is why stablecoin growth can continue even when speculative crypto activity slows. A corporate using stablecoins for supplier payments does not need to believe in crypto as an asset class. A fintech using stablecoins for cross-border settlement does not need to market itself as Web3. A bank using tokenized cash for internal settlement does not need retail crypto users.

The future of stablecoins is therefore not just “more crypto users.” It is:

exporters receiving dollar settlement faster;

fintechs lowering remittance and payout costs;

banks tokenizing deposits and collateral;

corporates managing treasury across jurisdictions;

exchanges using stablecoins as margin and settlement assets;

asset managers connecting money market funds to on-chain distribution;

AI agents and automated workflows needing programmable payment rails.

This is why the stablecoin market is becoming strategically important to sovereigns. USD stablecoins extend dollar reach into digital networks. Euro stablecoins remain underdeveloped partly because Europe has regulatory clarity but weaker market liquidity. Asian stablecoins may grow where local currency settlement, trade finance, and regulated payment networks create demand.

The competition is no longer “stablecoins versus banks.” It is which institutions will control the compliant digital money stack.

Despite the progress, several open questions remain:

1. Concentration risk remains underpricedThe market remains highly concentrated around a small number of USD issuers. This creates liquidity efficiency but also creates systemic vulnerability. If a major issuer faces a redemption event, reserve liquidation could transmit stress into short-term funding markets.

2. Reserve transparency is still unevenRegulatory clarity does not automatically equal reserve quality. Some issuers provide stronger disclosure, while others remain less transparent around asset composition, custody, segregation, and audit standards. S&P has previously flagged concerns around reserve transparency and asset composition for major stablecoin issuers, underscoring why institutional users still need counterparty due diligence.

3. Yield regulation may reshape market shareIf Europe maintains a strict stablecoin interest ban while other jurisdictions allow economically similar yield-bearing structures, capital may migrate toward tokenized money market funds, offshore stablecoins, or synthetic yield products.

4. MiCA 2 may expand the regulatory perimeterDeFi, staking, lending, and tokenized financial assets are now part of the policy conversation. This may create a more complete framework, but it may also increase compliance costs for startups and protocols.

5. Non-USD stablecoins remain strategically important but commercially difficultGovernments want monetary sovereignty, but users want liquidity, convertibility, and global acceptance. Until euro, yen, SGD, AED, and other non-USD stablecoins have real payment demand and deep secondary liquidity, USD stablecoins will remain dominant.

6. Stablecoin-Treasury linkage may become a macro issueAs stablecoin reserves grow, issuers become larger buyers of short-duration sovereign debt. This can support Treasury demand in normal markets but may create liquidation risk during stress.

7. Compliance will define institutional adoptionFor banks and corporates, the key question is not whether stablecoins are useful. It is whether they are usable under AML, sanctions, accounting, tax, custody, operational risk, and regulatory capital frameworks.

Onigiri Capital (onigiri.vc), a US$50 million blockchain-focused investment fund, launched by Saison Capital, the venture arm of Japan’s Credit Saison. Onigiri Capital is on a mission to chart the next chapter of finance and invest in seed and Series A blockchain startups in stablecoins, payments, RWAs, DeFi and financial infrastructure. The fund’s strategy emphasizes connecting startups to Asia’s growing digital asset markets.

If you’d like to discuss or contribute to the next Institutional Lens, contact us at hi@onigiri.vc

Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.