Fed Vice Chair Michael Barr flags stablecoin risks…regulators move to ускорate rulemaking

The U.S. Federal Reserve (Fed) has highlighted stablecoins’ money-laundering and financial-stability risks, underscoring the need for regulation.

According to Bloomberg on the 31st (local time), Fed Vice Chair Michael Barr, in prepared remarks, pointed to risk factors related to the structure of stablecoin reserve assets.

Barr said that “the quality and liquidity of stablecoin reserve assets are central to long-term sustainability,” adding that “issuers have incentives to expand into higher-risk assets to maximize profits.”

He also noted potential benefits, saying stablecoins could improve corporate treasury management and increase the efficiency of cross-border remittances. Unlike traditional remittance methods that can take days, they can enable faster payments, he explained.

The Fed and financial regulators are currently working on a stablecoin regulatory framework. Under the “Genius Act,” issuers must officially register and hold reserves equal to the amount issued.

Barr said that “when strict controls and supervision of reserve assets are combined with capital and liquidity requirements, it can enhance stablecoins’ stability and their potential use as a means of payment,” while cautioning that “whether these objectives are achieved depends on the detailed design of the regulations.”