Federal Reserve Board Member Barr Warns of Stablecoin Risks, Emphasizes Need for Strengthened Reserve Oversight and Enforcement Mechanisms

Federal Reserve Board Member Barr emphasizes that stablecoins must develop under strict regulation, warning that a lack of constraints could repeat issues from the history of private currencies.

He points out that while the GENIUS Stablecoin Act has provided an initial framework, there is a need to strengthen enforcement and monitoring to ensure the safety and liquidity of reserve assets, thereby preventing potential financial stability risks.

According to Gate News, on March 31, Barr delivered a speech on stablecoin regulation, stressing that the development of stablecoins must be based on strict regulation, and warning that without effective constraints, it could repeat "the long history of problems caused by private currencies."

Barr notes that although the GENIUS Stablecoin Act has provided an initial regulatory framework for the industry, the key lies in subsequent implementation, including continuous monitoring of reserve assets and mechanisms to prevent illegal uses.

He emphasizes that stablecoins can only be truly considered "stable" if they maintain parity and redemption stability across various market conditions. During market stress or when issuer risks increase, the liquidity and safety of reserve assets are especially critical.

Barr also points out that stablecoin issuers have an incentive to increase yields for profit, which may lead them to take higher risks in reserve management, potentially threatening financial stability.

Currently, stablecoin regulation remains one of the major points of disagreement in U.S. cryptocurrency legislation, which has somewhat impacted the progress of related bills.