GENIUS Act Lacks ‘Robust Guardrails’ for Stablecoin Users, Fed’s Barr Warns

Federal Reserve Governor Michael Barr said the new GENIUS Act represents progress in regulating stablecoins. Barr noted that it has no strong guardrails to protect holders and guarantee the system stays stable in the long term.

Barr Recognizes the Role of Stablecoins in Payment Settlements

Delivering a speech at the 2025 D.C. Fintech Week in Washington, Barr argued that stricter regulations would help avoid problems that would be created by regulatory arbitrage and consumer confusion. In addition, he recognized that stablecoins would bring considerable enhancements to payment systems worldwide.

According to Barr, the GENIUS Act sets a premise by making it mandatory for stablecoins to be pegged on assets that are very liquid, and that includes U.S. Treasury bills. However, he said the law leaves gaps that could still expose consumers to risk.

According to him, it allows some reserve assets to lose value during market stress through uninsured deposits or certain foreign-backed instruments. Barr also stated that the existing regulatory model has the potential to make Bitcoin repo contracts serve as reserve assets, potentially causing a risk to the one-to-one stability they offer.

The Fed governor said that when properly backed and regulated, stablecoins can improve liquidity and efficiency for both households and businesses. Hence, it is no surprise that some U.S. states like North Dakota have launched their own stablecoins.

Furthermore, Barr commended stablecoins as ones that facilitate faster payment which are cheaper and accessible by nearly everyone. He identified their potential in such areas as remittances, trade finance and multinational treasury management.

Barr Calls for Unified Rules to Further Build Trust in Stablecoins

“The technology behind stablecoins offers real benefits for global payments,” Barr said. “But without clear guardrails, even the most promising innovations can introduce new risks.” He added that stablecoins can help people in developing economies send and receive money more efficiently while reducing transaction costs.

Another issue raised by Barr was coordination between the federal and state regulators. He cautioned that the various oversight authorities would develop separate regulations and motivate corporations to take advantage of the most lenient jurisdiction. SWIFT’s new blockchain pilot for stablecoin settlements shows how legacy systems are also testing cross-border coordination.

He urged regulators to close these gaps during the rulemaking phase to avoid repeating past financial crises rooted in fragmented supervision. “Stablecoins can play a positive role in the future of payments,” Barr concluded.

“The challenge now is making sure the framework is strong enough to support trust, protect consumers, and allow innovation to thrive.” The speech signaled that the Fed sees potential in stablecoins. However, he insists that their success in the future depends on credible regulation that prevents the very risks they aim to solve.