Important points
- The inclusion of assets licensed by foreign governments in the GENIUS Act could enable repo holdings of Bitcoin.
- Barr emphasized the need for a strong regulatory framework to ensure that stablecoins safely benefit the financial system.
US Federal Reserve President Michael Barr said today that stablecoin issuers may argue that Bitcoin is a legal reserve asset in El Salvador because it is recognized as legal tender under the GENIUS Act. He warned that this poses a risk if Bitcoin’s price collapses, potentially undermining the stablecoin’s stability and investor confidence.
Barr, a key official at the U.S. central bank, has previously advocated for stronger regulatory guardrails for stablecoins to protect financial stability while enabling innovation. He recently highlighted the importance of implementing the provisions of the recent Stablecoin Act to address regulatory gaps.
Federal Reserve officials, including Barr, have emphasized the potential for stablecoins to benefit households and businesses if backed by strong protections. This is consistent with broader debates about the dollar’s role in maintaining its dominance in global markets.
Stablecoins are digital assets that are pegged to a stable value and are increasingly being looked at by regulators as a potential means of payment that requires coordinated federal and state oversight.
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