Federal Reserve Governor Criticizes GENIUS Act for Insufficient Stablecoin Protections

Federal Reserve Governor Michael Barr has raised significant concerns about the GENIUS Act's ability to safeguard stablecoin users during periods of market stress. Speaking at D.C. Fintech Week 2025, Barr warned that the legislation fails to establish adequate protections, potentially exposing holders to financial risks.

The act currently permits stablecoins to be backed by assets like U.S. Treasury bills, but Barr highlighted vulnerabilities in the framework. "Some reserve assets allowed under the act could lose value when markets are volatile," he stated, emphasizing the need for stronger safeguards.

Barr specifically questioned whether Bitcoin repo contracts should qualify as acceptable reserves under the current rules. His critique comes amid growing institutional adoption of stablecoins for payments and settlements.

While acknowledging the GENIUS Act as progress for digital asset regulation, Barr stressed that robust guardrails are essential. "Properly regulated stablecoins can offer faster, cheaper payments," he noted, "but not at the expense of consumer protection or systemic stability."