FSOC Drops Crypto Assets from Financial Vulnerabilities List in Latest Report
Regulators just handed crypto its biggest win in years—and Wall Street didn't see it coming.
The Financial Stability Oversight Council quietly removed digital assets from its annual threat assessment. No fanfare. No press conference. Just a 180-degree pivot that signals a seismic shift in how Washington views the $2 trillion market.
What Changed Behind Closed Doors
For years, FSOC reports read like crypto obituaries—endless warnings about contagion risks and investor protection gaps. This year's document tells a different story. The council now sees a maturing ecosystem with clearer guardrails, not a systemic danger.
The timing couldn't be more ironic. Traditional finance keeps stumbling over commercial real estate losses and regional bank failures while crypto protocols hum along with near-perfect uptime. Maybe decentralized systems aren't the problem—they're the audit trail Wall Street wishes it had.
Washington's Silent Validation
This isn't just bureaucratic paperwork. When FSOC speaks, every regulator from the SEC to the OCC listens. Their risk assessment directly influences examination priorities, enforcement resources, and legislative agendas across all fifty states.
The move effectively greenlights institutional adoption that's been waiting on the sidelines. Pension funds, endowments, and family offices now have regulatory cover to allocate beyond Bitcoin ETFs into actual blockchain networks—the kind that generate yield while traditional banks struggle with 3% CDs.
Legacy Finance's Awkward Moment
Watch traditional asset managers scramble to explain why they've been dismissing an asset class regulators no longer consider systemically risky. Their compliance departments will spend Q1 rewriting playbooks that treated crypto like radioactive waste just twelve months ago.
The ultimate finance jab? Banks will now pay consultants seven figures to understand the decentralized systems they spent a decade lobbying against—while crypto-native firms keep building with open-source code anyone can audit for free.
Don't mistake this for unconditional approval. The report still mentions monitoring and 'evolving risks.' But the language has shifted from prevention to integration—from 'contain the threat' to 'manage the opportunity.'
The message is clear: Crypto graduated from the regulatory penalty box. The real question is whether traditional finance can keep up with the innovation it tried to suppress.
FSOC says the GENIUS Act laid the foundation for crypto regulation
The 2025 FSOC report highlighted the GENIUS Act as the legislation that established the federal framework for regulating stablecoin payments. The law requires 100% reserve disclosures and oversight by agencies, including the Federal Reserve, the Office of the Controller of the Budget, and the Federal Deposit Insurance Corporation.
The TRUMP administration has maintained a pro-crypto stance, urging regulators to withdraw previous broad warnings to financial institutions regarding their engagement with crypto-related activities. The GENIUS Act, signed into law in July by the President, now positions compliant stablecoins to support the U.S dollar’s role in the international financial system. According to the FSOC 2025 report, continued use of dollar-denominated stablecoins will reinforce the dollar position in global economic systems.
Meanwhile, the 2025 FSOC report avoids flagging explicit vulnerabilities such as potential contagion from stablecoins or spot market connections. This is in contrast to the 2024 FSOC report, which had recommended congressional approval on stablecoin regulation and spot markets. The 2025 report’s digital assets section has included a ‘further actions’ subsection that references the President’s Working Group report on U.S. crypto activity and the administration’s agenda to enable innovation and American leadership in digital financial technologies.
President Donald Trump issued an Executive Order 14178 in January, revoking Biden’s directive. The order introduced responsible growth of digital assets, while prohibiting the issuance of a central bank digital currency. Other regulatory steps highlighted in 2025 include the Securities and Exchange Commission’s rescission of Staff Accounting Bulletin 121 via SAB 122, which removes the balance-sheet liability requirements for custodial crypto assets.
EU warns that stablecoins pose a financial systemic failure risk if unmanaged
The OCC issued guidance earlier this year authorizing banks to conduct specific crypto transactions and granted preliminary trust charters to firms such as Circle, Ripple, Paxos, BitGo, and Fidelity Digital Assets. The 2025 report has encouraged institutional growth, especially in spot Bitcoin and ethereum exchange-traded funds and tokenization assets. Such markets and institutions performed well in 2025.
According to the 2025 FSOC report, illicit finance may be facilitated by stablecoins; however, most on-chain activities are transparent and legitimate. The report calls for continued enforcement without blocking lawful use cases of crypto assets. It also encourages ongoing regulatory developments across custody, anti-money laundering obligations, and the use of blockchain. Current frameworks such as the GENIUS Act allow for managed participation in the digital assets ecosystem.
Globally, the Financial Stability Board and the Financial Action Task Force have shown concerns over fragmented oversight and illicit flows. For instance, European regulators have warned of the systemic risks posed by stablecoins. According to a Cryptopolitan report, Pierre Gramegna, the managing director of the European Stability Mechanism, cautioned in October that stablecoins could endanger global financial stability if left unregulated. Gramegna urged stablecoins to be tied to central bank money before gaining mainstream adoption to avoid the risk of the entire financial system collapsing, not just in Europe.
The UK has also signaled that it will regulate crypto assets from 2027, aligning with the U.S. approach. The UK Financial Conduct Authority has called for Keir Starmer, UK Prime Minister, to prioritize stablecoin regulation.
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