Federal Reserve Governor Michael Barr has expressed concern that stablecoins could potentially be backed by Bitcoin under the recently passed GENIUS Act, warning that such arrangements could compromise the stability of these digital payment instruments.
Speaking at the 2025 D.C. Fintech Week on October 16, Barr acknowledged the potential benefits of stablecoins for international remittances, cross border trade, and corporate treasury management, while highlighting significant regulatory gaps that need addressing. While the GENIUS Act doesn’t directly support Bitcoin as reserves, it allows overnight repo that supports “any medium of exchange authorized or adopted by a foreign government to be held as a reserve asset.”
“For example, until quite recently, El Salvador treated Bitcoin as legal tender, and it still specifically permits Bitcoin to be used for transactions on a voluntary basis. As a result, an issuer could argue that Bitcoin repo could qualify as an eligible reserve asset for a stablecoin,” Barr stated in his speech.
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