Fed Vice Chair: "Stablecoin regulation needed…must include safeguards against bank runs"

Michael Barr, the Federal Reserve’s vice chair for supervision and a member of the Board of Governors, said on the 31st (local time) that there is a need for greater clarity in stablecoin regulation.

According to Cointelegraph and others on the 1st (local time), Barr attended an event hosted by the Federalist Society in Washington, D.C. on the previous day (31st) and said that the stablecoin bill (the GENIUS Act) "provides the regulatory clarity issuers need," adding that "clearer stablecoin regulation would accelerate market growth." Barr said that whether regulation succeeds "depends on how federal and state regulators enforce the law."

He also voiced concerns about stablecoins. Barr noted that "stablecoins can help reduce remittance costs, speed up trade finance processing, and improve the efficiency of corporate treasury management," but pointed out that "some people exploit the fact that stablecoins can be purchased in the secondary market without identity verification." He added that "(stablecoin) issuers may be tempted to raise the yield on reserve assets in ways that undermine trust."

Barr cited reserve-asset requirements, capital and liquidity rules, anti-money laundering (AML), and the potential for regulatory arbitrage as key issues going forward. Citing examples such as the 19th-century U.S. free banking era and the Panic of 1907, he also said that "private money without adequate safeguards has a long and painful history."