In December, the International Monetary Fund (IMF) published the report Understanding Stablecoins, warning that the digital currency involves “significant risks.”

“All of this is a recipe for something that could end very badly,” says Adam Posen. He points to a series of troubling developments currently unfolding in the United States. First and foremost, members of Donald Trump’s family and several political allies have invested large private sums in the stablecoin industry. This is not illegal, but it can have unfortunate consequences when politics and money become intertwined. Many investors may look at stablecoin companies and conclude: If a crisis hits, these firms will likely be rescued by the government—after all, politicians have their own money at stake. That belief can create a dangerous dynamic. “You get overinvestment, you get a financial bubble, and potentially an even worse collapse,” Posen warns.

At the same time, the Trump administration has attacked the independent regulatory agencies responsible for overseeing the financial sector—institutions meant to detect problems before they spiral out of control. That is the next item on Posen’s growing list of concerns. “The reason we have regulation is to prevent things from going wrong,” he says. He notes that Congress did, in fact, pass the so-called GENIUS Act over the summer—an initial attempt to regulate stablecoins and establish a legal framework. But Posen is unimpressed. “I simply don’t understand why they call it genius,” he says, pointing out that stablecoin issuers are subject to far less regulation and supervision than traditional banks.