BREAKING: US Regulators Downgrade Crypto’s Systemic Risk Status – Markets Breathe Easier

In a seismic shift for digital assets, Washington's top financial watchdog just pulled crypto off the red alert list.

The bombshell reassessment—buried in year-end regulatory filings—signals growing institutional comfort with volatile crypto markets. No longer tagged as a potential domino threat to traditional finance, the sector gets its first regulatory olive branch since the 2022 crash.

Wall Street analysts are already spinning the move as 'proof of maturity'—though cynics note it conveniently aligns with election-year lobbying efforts. One hedge fund manager quipped: 'Guess they finally realized stablecoins pose less risk than Treasury secretaries tweeting.'

The decision could accelerate institutional adoption, with crypto-native firms now pushing for clearer on-ramps. But skeptics warn the pendulum could swing back faster than a Bitcoin whale's sell order.

Legislative Progress and Banking Access Reforms

The transformation stems largely from the passage of the GENIUS Act in July, which established America’s first comprehensive federal framework for payment stablecoins.

The legislation requires licensed issuers to maintain reserves in highly liquid assets, such as U.S. Treasuries, and prohibits rehypothecation except for limited purposes.

Treasury Secretary Scott Bessent noted in the report that continued use of dollar-denominated stablecoins supports the dollar’s role in international finance.

Beyond stablecoins, federal agencies have systematically withdrawn restrictive guidance that previously discouraged banks from engaging with crypto firms.

The SEC eliminated prior-notification requirements for offering digital asset custody services, while banking regulators rescinded joint statements that effectively pushed crypto activity outside traditional finance.

The Federal Reserve ended its novel activities supervision program, returning oversight to normal supervisory processes.

The Office of the Comptroller of the Currency released preliminary findings showing all nine largest national banks imposed inappropriate restrictions on lawful crypto businesses between 2020 and 2023.

JPMorgan Chase, Bank of America, Citibank, Wells Fargo, and others maintained internal policies requiring escalated approvals or blanket limitations on digital asset companies, alongside sectors such as firearms and adult entertainment.

Comptroller Jonathan Gould described the practices as “” and an inappropriate use of national bank charters.

The findings build on President Trump’s August executive order guaranteeing fair banking access and state-level fair access laws in Florida, Idaho, and Tennessee, designed to prevent ideological account closures.

Market Structure Legislation Races Senate Deadline

Last week, Senator Cynthia Lummis pushed for immediate Senate Banking Committee markup of the Responsible Financial Innovation Act before the holiday recess, warning negotiations cannot drift into February without risking election-year paralysis.

She told the Blockchain Association Policy Summit that bipartisan drafts have been rewritten repeatedly, exhausting staff members as lawmakers struggle to reconcile the House and Senate approaches to defining which tokens fall outside securities classification.

@SenLummis says she wants a markup on the crypto market structure bill next week even as staff are “exhausted” from nonstop revisions. #Crypto #USPolicy #Lummishttps://t.co/RadNIvnWLp

The House passed the Digital Asset Market Clarity Act in July, giving the CFTC primary oversight of digital commodities while preserving SEC authority over fundraising.

The Senate version uses the term “ancillary assets” and faces tension over decentralized finance regulation.

Senator Thom Tillis warned that missing the December window could freeze the bill for the rest of 2026.

However, Senator Mark Warner also suggested completing everything before the holiday recess would be difficult, noting the WHITE House still hadn’t provided final language on quorum and ethics rules.

Traditional Finance Embraces Tokenized Products

JPMorgan Chase demonstrated the sector’s mainstreaming by launching its first tokenized money-market fund on the ethereum network.

The My OnChain Net Yield Fund begins with $100 million of the bank’s capital before opening to qualified investors with minimum investments of $1 million.

The MONY fund accepts subscriptions in cash or USDC, demonstrating institutional adoption of crypto-native payment rails for settlement alongside traditional cash.

JPMorgan is launching its first tokenized money-market fund on Ethereum, reports the WSJ. #JPMorgan #Ethereum https://t.co/bjjIFNFRnJ

The launch follows the GENIUS Act’s regulatory clarity, with Wall Street accelerating tokenization efforts across equities, bonds, and real-world assets.

John Donohue, JPMorgan’s global liquidity head, cited a “” and the bank’s intention to lead the space with product lineups that match traditional money-market fund choices on the blockchain.

The integration of blockchain into Core financial products, once considered distant from crypto, indicates the technology is progressing from experimental to infrastructure-grade status within traditional finance.