The Fed's Powell Warns of Stablecoin Risk, Emphasizes Need for Stronger Regulation and Reserve Review

BlockBeats News, April 1st, Federal Reserve Board Member Michael Barr stated that the development of stablecoins needs to be built on strict regulation, and warned that without effective constraints, there may be a repetition of the "long historical problems brought by private money." Barr pointed out in his speech that although the "GENIUS Stablecoin Act" has provided the industry with a preliminary regulatory framework, the key lies in subsequent implementation, including ongoing monitoring of reserve assets and mechanisms to prevent illegal use.

He emphasized that stablecoins can only be truly considered "stable" if they can be redeemed at face value in various market conditions. The liquidity and security of reserve assets are particularly crucial under market pressure or heightened risks from the issuer.

Furthermore, Barr noted that stablecoin issuers have the incentive to increase returns to gain profits, which may lead them to take on higher risks in reserve asset management, posing a potential threat to financial stability. (The Block)