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<p>Stablecoins are advancing rapidly in Washington. The Federal Reserve, however, refuses to sign a blank check. Michael Barr, member of the Fed’s Board of Governors, warns against too light regulation of assets that could, in a crisis, threaten the stability of the entire financial system.</p>
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<h2 id="h-barr-monte-au-creneau-la-fed-veut-encadrer-les-stablecoins-de-pres">Barr steps up, the Fed wants to closely regulate stablecoins</h2>
<p>On Tuesday, during a public address in Washington, Michael Barr, member of the Federal Reserve’s Board of Governors, clearly stated his position on stablecoins. He directly targeted the <a href="https://www.cointribune.com/en/everything-you-should-know-about-the-genius-act/" rel="noopener noreferrer nofollow">GENIUS</a> law currently debated in Congress. Without rejecting the text, he issued multiple warnings about the risks these assets pose to financial stability.</p>
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<p>Barr does not mince words. He recalls a historical truth often forgotten: private money, without solid safeguards, always ends badly.&nbsp;</p>
<p>“<em>A long and painful history of private money created without sufficient guarantees</em>“, he says. A phrase that sums up centuries of banking crises, financial panics, and resounding failures.</p>
<p><a href="https://www.theblock.co/post/395970/feds-barr-invokes-long-painful-history-encouraging-strong-stablecoin-oversight?utm_source=rss&amp;utm_medium=rss" rel="noopener noreferrer nofollow">His central concern is about the quality of reserves</a>. A stablecoin is only stable if the issuer can redeem at any time, even in the middle of a market storm. However, Barr points out a structural problem: issuers have a direct financial interest in maximizing the returns on their reserves. Which mechanically pushes them to take more risks. A ticking time bomb, according to him, if no serious controls are imposed.</p>
<p>” <em>The quality and liquidity of reserve assets in stablecoins are essential to their long-term viability</em>“, he emphasized. A warning aimed as much at issuers as at legislators tempted to move too fast.</p>
<h2 id="h-un-debat-legislatif-sous-haute-tension-entre-lobbies-et-calendrier-electoral">A highly tense legislative debate between lobbies and electoral calendar</h2>
<p>Barr’s remarks come in a particularly turbulent legislative context. In the Senate, <a href="https://www.cointribune.com/en/stablecoins-coinbase-rejects-a-key-compromise-of-the-us-senate/" rel="noopener noreferrer nofollow">the GENIUS bill is stalling</a>. And this is not the only source of blockage: Coinbase announced just this week that it refuses to support the latest proposed compromise. The sticking point? The yield on stablecoins.</p>
<p>The issue is simple to understand:</p>
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 <li>Banks worry that a yield-bearing stablecoin will drain savings out of the traditional system.</li>
 <li>Exchanges like Coinbase see this yield as a pillar of their business model.</li>
 <li>Congress tries to decide but finds itself caught between these two powerful lobbies.</li>
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<p>Despite several meetings organized by the White House to try to reach an agreement, no concrete progress has been made. Senator Cynthia Lummis has even warned that the midterm election schedule could definitively bury the reform if no compromise emerges quickly.</p>
<p>This standoff happens within a Fed politically weakened itself. Jerome Powell, whose term expires in May, faces increasing pressure from Donald Trump, who has tried everything to push him out.&nbsp;</p>
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<p>His designated successor, <a href="https://www.cointribune.com/en/the-senate-will-have-to-decide-on-kevin-warsh-chosen-by-trump-to-lead-the-fed/" rel="noopener noreferrer nofollow">Kevin Warsh</a>, is still waiting for Senate confirmation, blocked by Republican lawmakers as long as a legal procedure against Powell is not closed.</p>
<p>Barr’s warning is therefore not trivial. It signals that the <a href="https://www.cointribune.com/tag/us-federal-reserve-fed/" rel="noopener noreferrer nofollow">Fed</a> intends to play an active role in the regulation of stablecoins, and that it will not let the market self-regulate. While Washington is torn between banks, exchanges, and internal political wars, the future of the dollar is at stake, and with it, the place of the United States in tomorrow’s finance.</p>

Fed Governor Michael Barr Calls for Strict Regulation of Stablecoins

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