FSOC has removed crypto from its systemic risk list after Trump’s pro‑crypto order, the GENIUS Act, SEC and OCC shifts, and growing ETF and stablecoin use by U.S. banks.
Summary
- FSOC’s 2025 report moves digital assets from “vulnerabilities” to “significant market developments,” citing institutional adoption via spot Bitcoin and Ethereum ETFs and tokenization.
- Trump’s Executive Order 14178, the GENIUS Act, SAB 121’s rescission, and OCC guidance together promote fully backed dollar stablecoins, block a U.S. CBDC, and give banks clearer paths to custody and crypto intermediation.
- Global bodies like the FSB and FATF still warn of fragmented rules, illicit flows, and stablecoin risks even as FSOC’s shift eases macroprudential stigma for U.S. banks, ETFs, and lending markets.
The Financial Stability Oversight Council removed digital assets from its list of financial-system vulnerabilities in its 2025 annual report, ending a three-year period during which cryptocurrency was classified as a potential systemic threat requiring heightened supervision and new legislation.
Digital assets were reclassified into a neutral “significant market developments to monitor” category and described as a growing sector with increasing institutional participation through spot Bitcoin and Ethereum exchange-traded funds and tokenization of traditional assets, according to the report.
Financial Stability Oversight Council targets new rules
The FSOC’s 2022 report, issued under former President Joe Biden’s Executive Order 14067, concluded that “crypto-asset activities could pose risks to the stability of the U.S. financial system” and called for new legislation on spot markets and stablecoins. The 2024 report classified digital assets under vulnerabilities and warned that dollar stablecoins “continue to represent a potential risk to financial stability because they are acutely vulnerable to runs” without bank-like prudential standards.
The 2025 report reversed that framing, noting that U.S. regulators have “withdrawn previous broad warnings” to financial institutions about cryptocurrency involvement. The report stated that growth of dollar stablecoins will likely support the dollar’s international role over the next decade. Treasury Secretary Scott Bessent’s cover letter redefined FSOC’s mission, stating that cataloguing vulnerabilities “is not sufficient” and that long-term economic growth is integral to financial stability.
Three policy developments in 2025 accompanied the FSOC shift, according to regulatory filings and public records.
President Donald Trump’s Executive Order 14178 revoked Biden’s cryptocurrency executive order and established policy “to support the responsible growth and use of digital assets” while banning a U.S. central bank digital currency. The administration’s subsequent Digital Assets Report emphasized tokenization, stablecoins, and U.S. leadership.
Congress passed the GENIUS Act, signed in July 2025, which creates “permitted payment stablecoin issuers,” requires 100 percent backing, and grants primary oversight to the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and state regulators.
In January 2025, the Securities and Exchange Commission rescinded Staff Accounting Bulletin 121 through SAB 122, removing guidance that required custodial crypto assets to be recorded on banks’ balance sheets as liabilities. The OCC issued Interpretive Letter 1188, allowing national banks to act as intermediaries in “riskless principal” cryptocurrency transactions. Separate OCC guidance permits banks to hold small amounts of native tokens to pay gas fees for custody or stablecoin operations. The OCC granted preliminary national trust bank charters to Circle, Ripple, BitGo, Paxos, and Fidelity Digital Assets.
Congressional Research Service guidance notes that each FSOC council member must either attest that “all reasonable steps to address systemic risk are being taken” or explain what additional measures are needed in the annual report.
In 2022, FSOC identified digital assets as a priority area and recommended new authorities for spot markets and stablecoins. In 2023, the council listed digital assets as a “financial stability vulnerability,” citing price volatility, high leverage, interconnectedness, operational risks, and the risk of runs on platforms and stablecoins. The 2024 report warned that stablecoins represented a potential risk to financial stability because of their vulnerability to runs absent appropriate risk-management standards.
The 2025 report did not offer recommendations regarding digital assets nor express explicit concerns, and recounted how regulators had withdrawn broad cryptocurrency warnings while flagging stablecoins only in an illicit-finance subsection.
Global regulatory bodies have not adopted similar positions. The Financial Stability Board’s October 2025 review noted cryptocurrency’s global market capitalization roughly doubled to $4 trillion and warned of “significant gaps” and “fragmented, inconsistent” implementation of its 2023 cryptocurrency standards. The FSB assessed financial stability risks as “limited at present” but rising with interconnection and stablecoin use.
The Financial Action Task Force’s June 2025 update reported that only 40 of 138 jurisdictions are “largely compliant” with its cryptocurrency anti-money-laundering rules and cited tens of billions in illicit flows. FSOC’s 2025 report maintained that dollar stablecoins can be abused for sanctions evasion and illicit finance, calling for continued monitoring and enforcement.
The reclassification removes a macroprudential designation that previously created caution among large banks, insurers, and pension funds regarding cryptocurrency exposure beyond indirect holdings, according to financial industry analysts. The policy change does not mandate Bitcoin allocations but reduces the likelihood that new systemically important financial institution rules or supervisory guidance will restrict ETF, custody, or lending channels.
The SEC approved spot Bitcoin and Ethereum ETFs in 2024, and additional cryptocurrency ETF filings were submitted in 2025. The GENIUS Act and OCC’s riskless-principal guidance provide U.S.-regulated banks with legal pathways to hold stablecoin reserves, intermediate flows between Bitcoin ETFs and stablecoin rails, and tokenize collateral.
The SEC and Commodity Futures Trading Commission continue to dispute jurisdiction over tokens other than Bitcoin or Ethereum. FATF and FSB reports indicate that international coordination on anti-money-laundering and cross-border flows may tighten regardless of the U.S. policy shift.
The council’s reclassification of cryptocurrency from “vulnerability” to “development” reflects an assessment that existing supervisory tools can manage current exposures, according to the report. The 2025 report stated that this assessment depends on orderly spot ETF flows, full backing by stablecoin issuers, and the absence of major custody or bridge failures.
