US Federal Reserve Governor Michael Barr warned Tuesday that clearer stablecoin rules could accelerate market growth-but stressed regulators must tackle money laundering risks, bank run threats, and consumer protections.
He spoke at a Federalist Society event, noting that while the GENIUS Act offers needed clarity, its success hinges on how federal and state authorities apply the law.
Barr said stablecoins are currently used mostly for crypto trading and as a dollar store of value abroad, but could cut remittance fees and improve trade finance.
He also raised concerns over unverified purchases in secondary markets and potential mismanagement of reserve assets that could erode trust during crises.
His comments follow the US Treasury opening a second round of public comment on implementing the GENIUS Act in September 2025.
The law, signed by President Trump on July 18, 2025, mandates one-to-one backing of payment stablecoins with reserves like US dollars and Treasury bills.
Barr likened current challenges to past financial panics-such as the Panic of 1907-warning against weak safeguards in private money systems.
Federal Reserve Vice Chair Michelle Bowman had previously indicated banks are working on capital and liquidity rules for stablecoin issuers.
FDIC Chair Travis Hill noted that stablecoins won’t qualify for deposit insurance under the new framework.