U.S. Fed's Barr Catalogues Dangers to be Dodged in Future Stablecoin Regulations

Core Insights - The crypto sector and Wall Street financial giants are rapidly establishing stablecoin infrastructure ahead of U.S. regulatory frameworks [1][5] - Federal Reserve Governor Michael Barr highlighted the risks associated with nominally safe assets, emphasizing the vulnerability of private money to run risks [2][4] Regulatory Environment - The banking regulators have yet to draft rules for the recently passed GENIUS Act, leaving the stablecoin industry in an unregulated gray area [5] - Barr cautioned about the historical issues with private money lacking sufficient safeguards, referencing the 2008 Reserve Primary Fund incident [4] Market Dynamics - Tether's USDT, the leading stablecoin, operates offshore under a reserve approach that may not meet upcoming U.S. standards, although Tether plans to enter U.S. markets [5] - Stablecoin issuers have a strong incentive to maximize returns on reserve assets, which can lead to increased risks during market stress [6]