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The Financial Stability Oversight Council (FSOC) has excluded cryptocurrencies from its systemic risk list following former President Trump’s supportive actions on crypto, including the GENIUS Act, changes within the SEC and OCC, and the increasing adoption of ETFs and stablecoins by U.S. banks.
Summary
- The 2025 FSOC report shifts digital assets from the “vulnerabilities” category to “significant market developments,” highlighting institutional acceptance through spot Bitcoin and Ethereum ETFs and the tokenization of assets.
- Trump’s Executive Order 14178, the GENIUS Act, the rescission of SAB 121, and OCC guidance collectively encourage fully-backed dollar stablecoins, prevent a U.S. CBDC, and clarify banks’ roles in cryptocurrency custody and intermediation.
- International bodies like the FSB and FATF continue to caution against inconsistent regulations, illicit transactions, and stablecoin concerns, despite FSOC’s shift reducing macroprudential apprehensions for U.S. banks, ETFs, and lending sectors.
In the 2025 annual report, the Financial Stability Oversight Council declared that digital assets no longer pose systemic threats, marking the end of a three-year era during which cryptocurrencies were seen as a financial risk necessitating strict oversight and new regulations.
Assets like cryptocurrencies have now been categorized as a “significant market development to monitor,” reflecting a growing sector with enhanced institutional engagement through spot Bitcoin and Ethereum ETFs and traditional asset tokenization, as noted in the report.
New Regulatory Aims from the FSOC
The FSOC’s 2022 findings, stemming from former President Biden’s Executive Order 14067, concluded that “crypto-asset activities could threaten the U.S. financial system’s stability” and urged new regulations regarding spot markets and stablecoins. The 2024 report labeled digital assets as vulnerabilities, warning about potential risks from dollar stablecoins that lack banking-level prudential standards.
The 2025 report overturned this perspective, highlighting how U.S. regulators have dialed back broad warnings to financial institutions regarding cryptocurrency engagement. It mentioned that the increase of dollar stablecoins is likely to bolster the dollar’s global position over the coming decade. Treasury Secretary Scott Bessent’s accompanying letter redefined FSOC’s objectives, emphasizing that listing vulnerabilities alone “is inadequate” and that sustained economic growth is vital for financial stability.
Three key regulatory milestones in 2025 accompanied the FSOC’s progressive stance, according to various public records and filings.
President Trump’s Executive Order 14178 repealed Biden’s crypto-focused executive order and laid out a policy “to promote the responsible growth and use of digital assets,” while prohibiting a U.S. central bank digital currency. The administration’s subsequent Digital Assets Report underscored the importance of tokenization, stablecoins, and American leadership in this arena.
Additionally, Congress passed the GENIUS Act, which became law in July 2025, establishing “permitted payment stablecoin issuers,” mandating full backing, and assigning primary oversight responsibilities to the Federal Reserve, the OCC, the FDIC, and state authorities.
In January 2025, the SEC repealed Staff Accounting Bulletin 121 through SAB 122, which previously mandated that custodial crypto assets be categorized as liabilities on bank balance sheets. The OCC also released Interpretive Letter 1188, permitting national banks to serve as intermediaries in “riskless principal” cryptocurrency transactions. Additional OCC guidance now allows banks to retain small quantities of native tokens to cover gas fees related to custody or stablecoin activities. Preliminary national trust bank charters were granted to companies like Circle, Ripple, BitGo, Paxos, and Fidelity Digital Assets by the OCC.
Guidance from the Congressional Research Service indicates that each FSOC member must verify that “all reasonable efforts to mitigate systemic risk are in place” or clarify any necessary additional actions in the annual report.
In 2022, FSOC prioritized digital assets, advocating for new authorities surrounding spot markets and stablecoins. The 2023 report identified digital assets as a “financial stability vulnerability,” citing concerns such as price fluctuations, high leverage, interconnections, operational dangers, and the risk of runs on platforms and stablecoins. The 2024 report cautioned that stablecoins could endanger financial stability without appropriate risk-management standards due to their susceptibility to runs.
The 2025 report refrained from providing recommendations related to digital assets and did not express specific concerns, explaining that regulators had eased broad warnings around cryptocurrency while referencing stablecoins solely within an illicit finance subsection.
International regulatory entities have not adopted similarly favorable views. The Financial Stability Board’s review in October 2025 noted that the global market cap of cryptocurrency had roughly doubled to $4 trillion, cautioning about “significant gaps” and “fragmented, inconsistent” compliance with its 2023 cryptocurrency standards. It assessed financial stability risks as “currently limited,” but on the rise due to increasing interconnections and stablecoin utilization.
The Financial Action Task Force’s June 2025 report indicated that only 40 of 138 jurisdictions are “largely compliant” with its cryptocurrency anti-money laundering regulations, highlighting tens of billions in illicit flows. FSOC’s 2025 report reiterated that dollar stablecoins could be misused for sanctions evasion and illegal activities, urging ongoing monitoring and regulation enforcement.
This reclassification lifts a macroprudential designation that had previously instilled caution among large financial institutions regarding exposure to cryptocurrencies beyond indirect holdings, according to insights from the financial sector. While the change in policy does not mandate specific Bitcoin allocation, it diminishes the chance that new regulations or supervisory guidance will create limitations on ETF, custody, or lending pathways.
The SEC approved spot Bitcoin and Ethereum ETFs in 2024, with additional cryptocurrency ETF applications filed in 2025. The GENIUS Act and OCC guidance for riskless principal transactions provide U.S. banks with legal frameworks to maintain stablecoin reserves, facilitate transfers between Bitcoin ETFs and stablecoin systems, and tokenize collateral.
The ongoing jurisdiction dispute between the SEC and the Commodity Futures Trading Commission over tokens beyond Bitcoin or Ethereum continues. Reports from FATF and FSB suggest that international cooperation on anti-money laundering and cross-border transactions could increase, independent of changes in U.S. policy.
The council’s decision to reclassify cryptocurrency from “vulnerability” to “development” indicates a belief that existing supervisory mechanisms are adequate to manage current risks, as per the report. The 2025 document asserted that this viewpoint relies on stable ETF transactions, full backing by stablecoin issuers, and the absence of significant custody or bridge crises.
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