Coinbase: CLARITY Act Makes Stablecoins Safe Amid Fed Worries

Coinbase’s top lawyer, Paul Grewal, responded to recent concerns that privately issued stablecoins pose a unique risk to the financial system, arguing the CLARITY Act would allow stablecoins to be run safely under clear rules and oversight.

Grewal argued, ‘Money that’s private isn’t inherently riskier than private healthcare or private transport. It’s how you manage the risk, and how you provide access and oversight. CLARITY promotes all this.’

Regulators and some policymakers have warned that runs on large stablecoins could lead to mass redemptions and spill over into traditional finance. Many stablecoins hold reserves in short-term U.S. Treasury securities, a pattern regulators say could create a contagion channel if issuers face sudden redemption pressure.

Two bills in Congress aim to address those risks. The GENIUS Act would impose tighter supervision on stablecoin issuers, including capital requirements, limits on reserve assets and mandated liquidity buffers. The broader market-structure bill called the CLARITY Act includes provisions intended to stabilize yield arrangements and reduce the potential for deposit outflows that could weaken community banks’ lending to small and medium-size businesses.

White House officials have highlighted stablecoins partly because issuers’ demand for Treasuries could lower government borrowing costs. Stablecoin firms currently hold about $200 billion in U.S. Treasury securities, a sum equivalent to under 1% of the overall Treasury market, with one issuer holding the largest share of that total.

Josh Lipsky, chair of international economics at the Atlantic Council, said stablecoins cannot replace the deeper institutional foundations that support the dollar, naming trust, fiscal discipline, the rule of law and independent monetary policy as those foundations.

Political debates over central bank independence and efforts to influence Federal Reserve policy have been linked to a weaker dollar. The U.S. Dollar Index is at its lowest level in several years.

Regulators continue to focus on operational risks: whether issuer reserves are liquid and transparent enough to meet large redemptions, how quickly sponsors can convert assets to cash without forcing distressed sales, and how interconnected crypto firms are with banks and custodians.

Supporters of the GENIUS and CLARITY bills say the measures would require clearer accounting of reserve composition and stronger safeguards to limit spillovers to the banking system. Coinbase and other industry officials maintain a regulated stablecoin market can coexist with traditional finance and support faster, cheaper payments. Other experts note that new rules would not change the wider political and institutional factors that affect a currency’s international standing.

Congress and regulators are weighing investor protection, financial stability and the potential benefits of digital payments as they consider the proposed legislation.