Federal Reserve Chair Kevin Warsh told the House Financial Services Committee on July 14 that the central bank would not rescue the cryptocurrency industry in a crisis, staking out that position during his first semiannual monetary policy testimony as chair.
Warsh rejects the idea of a crypto backstop
The exchange began when Rep. Brad Sherman, a California Democrat and longtime crypto skeptic, asked whether the Fed would support failing digital-asset firms the way it supported money market funds in 2008.
Warsh dismissed the premise. “We do not want to be in the bailout business, full stop,” he said. He added: “We want to be in a position where we’re not bailing out anybody, including crypto.”
He links the stance to his 2008 crisis experience
Warsh took office on May 15 and chaired his first Federal Open Market Committee meeting in June. In his testimony, he framed the issue through his own role in the last major financial crisis.
As a Fed governor under former Chair Ben Bernanke, Warsh helped design the 2008 rescue effort. “I still have the scars from the 2008 financial crisis,” he said. “That is not something we want to repeat.”
He argued that the bailouts that followed the crisis created moral hazard and said he wants to spare digital assets from the same outcome.
A clear boundary for the crypto market
For a market that has spent years seeking legitimacy alongside traditional finance, the comments drew a firm line. Bitcoin Magazine described Warsh as the first crypto-native Fed chair. His approach has been to treat Bitcoin as a gauge rather than an industry the state should protect.
During his nomination hearing, Warsh said Bitcoin is not a substitute for the U.S. dollar. He has also referred to Bitcoin’s price as a thermometer for whether monetary policy is in the right place.
GENIUS Act deadline is days away
The warning came just days before a major deadline. Rules to implement the GENIUS Act, the stablecoin law enacted in 2025, are due Saturday, and Warsh said the Fed is rushing to publish its proposals on time.
The law gives stablecoin holders priority over other creditors if an issuer fails and requires full reserves behind each coin.
With the stablecoin market near $310 billion, Sherman pressed Warsh on whether a run on one issuer could spread across the sector.
Warsh did not give an absolute commitment. He told lawmakers the Fed would act to limit extraordinary risks over the next four years, wording that leaves room for intervention in a systemic event. American Banker noted that he did not rule out any future step-in.
A second day of testimony brings more detail
At the Senate Banking Committee the following day, Warsh called on banking regulators to coordinate on GENIUS Act rulemaking to avoid regulatory arbitrage, where firms seek out the lightest oversight.
He paired that with a defense of Fed independence in monetary policy and a pledge to reduce a balance sheet that stands near $6.7 trillion.
Rules from the Fed, losses borne by firms
The message to crypto was clear. The Fed will write the rules of the road, but firms that overreach should expect to bear the cost of their own failures.
For an industry that has sought federal backing, Warsh’s position was that it should stand on its own.
This report first appeared in Bitcoin Magazine and was written by Micah Zimmerman.