Support for the GENIUS Act… Simultaneously Pointing Out Risks of Run and Money Laundering
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Michael Barr, Vice Chair of Federal Reserve Supervisors, stated at a Federalist Association event on the 1st that the GENIUS Act could provide clear regulatory standards for stablecoin issuers. However, he emphasized that the effectiveness of the act depends on how federal and state regulators actually enforce it.
Vice Chair Barr explained that stablecoins are currently primarily used as a store of value for the dollar in cryptocurrency transactions and some overseas markets. He assessed that stablecoins can contribute to reducing remittance costs and improving the efficiency of trade finance.
At the same time, Vice Chair Barr also pointed out major risks. He stated that if stablecoins are traded in the secondary market without identity verification, there is a possibility they could be exploited for money laundering. He also warned that market confidence could be undermined if issuers expand their reserve asset operations to increase yields.
Vice Chair Barr also cited historical examples. He emphasized the risks of asset structures vulnerable to redemption demands, citing the free banking era, the 1907 financial panic, the global financial crisis, and the instability of money market funds during the COVID-19 pandemic.
This remark came as the U.S. government transitioned from the legislative phase to the rule-making phase. The U.S. Treasury Department is establishing a specific regulatory framework while gathering additional opinions on the implementation of the GENIUS Act.
The Federal Reserve and other financial authorities are also continuing their efforts to supplement the system. Federal Reserve Governor Michelle Bowman stated that banking regulators are preparing capital and liquidity standards for stablecoin issuers. Travis Hill, Chairman of the Federal Deposit Insurance Corporation (FDIC), drew a line, stating that stablecoins are not eligible for deposit insurance.
Vice Chair Barr identified reserve asset standards, regulatory arbitrage, issuer scope of activity, capital and liquidity requirements, anti-money laundering standards, and consumer protection frameworks as key challenges to be addressed during the implementation of the GENIUS Act.
Reporter Jeong Ha-yeon yomwork8824@blockstreet.co.kr
