The Federal Reserve is urging stricter regulations on stablecoins to mitigate potential risks to financial stability. According to Michael Barr, a member of the Federal Reserve Board of Governors, stablecoins have facilitated illicit activities such as terrorist financing and money laundering.
Chainalysis data estimates that stablecoins are now involved in 84% of illicit crypto activity, up from 15% in 2020. Hackers are exploiting stablecoins to evade sanctions through peer-to-peer transactions.
To address these concerns, regulators are racing to implement the GENIUS Act by July 2026. The act requires both regulatory and technological solutions to limit risks associated with stablecoins.