Overview
- Kevin Warsh told the House Financial Services Committee on Tuesday that the Fed “does not want to be in the bailout business, full stop,” rejecting promises to rescue failing crypto firms.
- He said the Fed still has limited authority to act against truly “extraordinary” systemic risks over the next four years but declined to promise automatic backstops for private companies.
- Warsh confirmed the Fed is racing to publish proposals to implement the GENIUS Act before the July 18 rulemaking deadline that requires full reserves for stablecoins and priority claims for holders.
- At a Senate Banking Committee appearance he urged regulators to coordinate GENIUS Act rules to prevent regulatory arbitrage and defended Fed independence while pledging to shrink a roughly $6.7 trillion balance sheet.
- The practical effect is a push toward market discipline for crypto firms and clearer rules for stablecoin users and banks, with potential second-order risks that runs at a large issuer could spread stress across payments and markets.