On July 14, Federal Reserve Chair Kevin Warsh informed the House Financial Services Committee that the central bank will not provide assistance to the cryptocurrency sector during downturns. This statement marked his inaugural semiannual monetary policy testimony in his new role.
The inquiry was posed by Rep. Brad Sherman (D-CA), a known critic of cryptocurrencies, who questioned if the Federal Reserve would support faltering digital-asset firms similarly to the way it backed money market funds in 2008. Warsh firmly dismissed this idea, stating, “We do not want to be in the bailout business, full stop,” adding, “We want to avoid bailing out anyone, including cryptocurrency.”
Having assumed office on May 15 and led his first FOMC meeting in June, Warsh contextualized his position with his past experience as a Fed governor under Chairman Ben Bernanke, during which he contributed to the 2008 financial rescue strategy. “I still carry the scars from the 2008 financial crisis,” he remarked. “We do not wish to repeat that experience.” He expressed concerns that the bailouts post-crisis created moral hazards, and he aims to protect the digital asset space from a similar fate.
For a sector that has been striving for legitimacy alongside traditional finance, Warsh’s comments establish a clear boundary. Known as the first crypto-friendly Fed chair, he has viewed Bitcoin as a measuring tool rather than an asset needing state protection. During his nomination hearing, he stated that Bitcoin is “not a substitute for the U.S. dollar” and referred to its pricing as an indicator for appropriate monetary policy.
Warsh addresses the GENIUS Act rules deadline
These remarks came just days ahead of an important deadline for implementing the GENIUS Act, the stablecoin legislation enacted in 2025, with rules due by this Saturday. Warsh confirmed that the Fed is “racing” to finalize its proposals by the set date.
The legislation prioritizes stablecoin holders for repayment during issuer failures while mandating full reserves for each coin. With the stablecoin market approaching $310 billion, Sherman emphasized that a failure of one issuer could trigger a wider crisis.
While Warsh refrained from making absolute commitments, he indicated that the Fed would intervene to mitigate “extraordinary” risks over the next four years, suggesting potential action in the event of a systemic crisis. As reported by American Banker, he did not eliminate the possibility of future intervention.
The next day, at the Senate Banking Committee, Warsh called upon banking regulators to collaborate on the GENIUS Act’s rule development to prevent regulatory arbitrage, which can allow firms to exploit lax regulations.
He coupled this advisory with a defense of the Fed’s independence in monetary policy and reiterated plans to reduce a balance sheet currently standing at approximately $6.7 trillion.
For the cryptocurrency sector, Warsh’s stance signals an era of market discipline: while the Fed will establish regulatory parameters, companies that mismanage their operations will face the repercussions. For an industry that sought federal support, Warsh’s message emphasizes the need for it to manage independently.