Federal Reserve Chair Kevin Warsh delivered a clear message to lawmakers this week: the central bank will not rescue failing crypto firms or stablecoin issuers. During his semiannual monetary policy testimony before the House Financial Services Committee, Warsh emphatically rejected the prospect of taxpayer-backed bailouts for the digital asset sector. “We do not want to be in the bailout business, full stop,” he said, adding that the Fed aims to be “in a position where we’re not bailing out anybody, including crypto.” The comments, which drew on his experience as a Fed governor during the 2008 financial crisis, placed the burden of losses squarely on investors and companies.
Warsh’s testimony came just days before a critical July 18 deadline for the GENIUS Act, the federal stablecoin law passed in 2025. The Fed is “racing” to publish proposed rules on time, he told lawmakers. The law requires stablecoin issuers to hold full reserves and grants stablecoin holders priority over other creditors in the event of an issuer failure. With the stablecoin market valued at around $310 billion, Warsh warned against regulatory arbitrage and urged banking regulators to coordinate rules to avoid gaps that could allow firms to seek the lightest oversight.
In a separate appearance before the Senate Banking Committee, Warsh faced sharp questioning from Senator Elizabeth Warren over ethics concerns involving Fed Vice Chair Michelle Bowman’s attendance at a private Bank of America dinner on June 17—hours after the Fed’s policy meeting. Warren alleged Bowman discussed monetary and regulatory matters during a blackout period. Warsh declined to comment on the ongoing investigation by the Fed’s inspector general, saying he would not “micromanage” or prejudge the review. Warren also pressed him over a reported $100 million payout from the sale of private investment shares before he took office; Warsh said the sale was mandated by ethics rules and declined to name the buyer publicly.
Senator Cynthia Lummis separately questioned Warsh about reports that Fed staff may have deleted supervisory records tied to failed lenders Silicon Valley Bank and Signature Bank. Warsh stated he had no reason to suspect criminal activity and pledged full cooperation with investigators. The hearings also touched on monetary policy, with New York Fed President John Williams defending the central bank’s forward-looking inflation approach. Warsh, often viewed as more crypto-friendly than his predecessors, once described Bitcoin as “the new gold” for younger investors but stressed it is not a substitute for the U.S. dollar. He also vowed to continue reducing the Fed’s nearly $6.7 trillion balance sheet.
