Fed’s Barr Warns Stablecoins Could Trigger Financial Instability As Clarity Act Stalls In Congress

Federal Reserve Governor Michael Barr warned Tuesday that stablecoins present money laundering and financial stability risks, citing a “long and painful history of private money created with insufficient safeguards” as stablecoin issues stall progress on the Clarity Act in Congress.
The Reserve Asset Risk
Barr focused his concerns on how stablecoin issuers manage reserves backing their tokens.
“The quality and liquidity of stablecoin reserve assets are critical to their long-run viability,” Barr said in prepared remarks for the Federalist Society. 
“At the same time, stablecoin issuers have an incentive to maximize the return on their reserve assets by extending the risk spectrum as far out as possible,” he added.
He warned that stablecoins will remain stable only if they can be reliably and promptly redeemed at par across a …Full story available on Benzinga.com

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