Foreign media reported that Federal Reserve Chairman Kevin Warsh stated during a congressional hearing on July 14 that the Fed does not wish to assume a bailout role if the cryptocurrency industry or the stablecoin market experiences a run. This statement drew attention not only because of his position, but also because Warsh has previously publicly held multiple cryptocurrency-related investments.
The hearing sent a clear signal.
The article states that, in response to a question from Representative Brad Sherman, Warsh said the Federal Reserve "does not want to be in the bailout business" and aims to ensure that no market participant relies on bailouts—cryptocurrency industry included. This was seen as an explicit rejection of the industry’s long-standing implicit safety net.
Crisis intervention has not been fully ruled out
However, foreign media noted that Warsh’s full statement did not completely close the door. He also stated that if special risks emerge in the coming years, the Federal Reserve would strive to mitigate their impact. He did not rule out the possibility of further action in response to a stablecoin bank run.
This means he rejects the expectation of conventional bailouts, not the abandonment of intervention in all cases. The article argues that the true dividing line lies in whether the risk evolves from a single crypto event into a systemic shock.
Stablecoin risks become the focus of discussion
The article notes that the stablecoin market size has approached $310 billion. A study by the New York Fed this year also indicated that stress on stablecoins could spill over into the banking system. If the risk is confined to smaller issuers, holders may need to bear the losses themselves; however, if large stablecoins are affected and their reserves—held in U.S. Treasuries or repurchase markets—are impacted, the situation could be different.
The USDC event remains an important reference point.
Foreign media also reviewed the 2023 USDC de-pegging event. At the time, Circle disclosed that approximately $3.3 billion in reserves were held at Silicon Valley Bank, causing USDC to briefly drop to around $0.87. Subsequently, U.S. regulators intervened with a systemic risk response for Silicon Valley Bank, indirectly helping USDC restore its peg.
The article argues that the event demonstrated the closest the crypto industry has ever come to a "bailout"—not due to policies specifically targeting crypto assets, but as a spillover effect from the banking system's rescue. Now, Warsh’s public downplaying of this expectation means that stablecoin issuers, custodians, and market participants will find it harder to directly factor in implicit federal support when pricing risk.
Additional information: Warsh previously stated that regulators were accelerating the implementation of rules related to the GENIUS Act, but foreign media reported that the relevant agencies subsequently failed to meet the scheduled deadlines, leaving the industry facing both unfinished regulations and unfulfilled rescue commitments.