Stablecoin Risks Catch Fed’s Attention

[Olamidetechie]

Federal Reserve Governor Michael Barr has just raised red flags. He revealed this at a recent event as he warned that stablecoins, even though they seem safe, are a growing risk to financial stability.
He said that his concern are many stablecoins are backed by volatile assets rather than cash, which could trigger “runs” when people try to redeem them all at once. Despite recent regulatory proposals (like the GENIUS Act), many stablecoins still operate with little oversight.
If you're using stablecoins or building with them, understanding this regulatory environment is no longer optional, it could define the future of your project or holdings.

[Alpen]

Federal Reserve Governor Michael Barr has just raised red flags. He revealed this at a recent event as he warned that stablecoins, even though they seem safe, are a growing risk to financial stability.
He said that his concern are many stablecoins are backed by volatile assets rather than cash, which could trigger “runs” when people try to redeem them all at once. Despite recent regulatory proposals (like the GENIUS Act), many stablecoins still operate with little oversight.
If you're using stablecoins or building with them, understanding this regulatory environment is no longer optional, it could define the future of your project or holdings.

With all due respect to Governor Michael Barr, the crypto space has already weathered several major stablecoin crises. We've seen this movie before.

• There was the time Tether reportedly lost around 30% of its USD reserves backing USDT.
• There was the UST depeg, which wiped out $34 billion.
• And we had the major launch of PayPal's stablecoin, PYUSD, bringing a TradFi giant into the mix.
  

And how did the market react? The first two events were followed by crypto winters. The third? Nothing happened. The market seems to be adapting

[flapduck]

Stablecoins are money-market plumbing without a backstop. The breaks are boring: opaque reserves, duration mismatch, and sticky redemptions. Algos die on reflexivity; fiat-backed live or die on audit quality and same-day wires. If it's "attestations" and you can't redeem at scale, you're holding an uninsured deposit.

Here's my practical tactic: trade with the deepest names, park idle only in short-duration, fully disclosed issuers, and test redemptions before size. Watch basis vs USD, Curve depth, and mint/burn throughput. If you're building, abstract the unit of account, support multiple issuers, and keep a crypto-collateral fallback.