Barr warns of stablecoin risks as regulators rush to finish GENIUS Act rules

Federal Reserve Governor Michael Barr said stablecoins carry meaningful risks tied to reserve-asset quality, regulatory arbitrage, money laundering and broader financial stability, speaking in Washington at the Federalist Society's event, "The GENIUS Act in Practice." Barr said the GENIUS Act offers "needed clarity", but stressed that outcomes will hinge on how federal and state supervisors write and enforce the implementing details. He highlighted several pressure points: anti-money-laundering vulnerabilities when stablecoins are bought in secondary markets without customer identification, the risk that reserve assets could come under strain during periods of market stress, and the incentive for issuers to seek out the most permissive oversight regime across multiple federal and state agencies. Under the law, federal agencies must finalize a comprehensive set of stablecoin rules by July 18, 2026. Barr said stablecoins today are used mainly for crypto trading and as a dollar store of value in foreign jurisdictions, but they could broaden into remittances, trade finance and corporate treasury management.