US Financial Watchdog No Longer Views Crypto as a Systemic Threat: Report

The U.S. Financial Stability Oversight Council (FSOC) has removed cryptocurrencies from its list of potential systemic threats to financial stability in its 2025 annual report, marking a dramatic regulatory pivot toward embracing digital assets.

Released on December 11, 2025, the report eliminates previous warnings about crypto’s contagion risks, stablecoin vulnerabilities to runs, and market concentration issues highlighted in 2024. Instead, it treats digital assets as “significant market developments,” citing institutional adoption via spot Bitcoin/Ethereum ETFs, tokenization growth, and calmer conditions.

Key drivers include the GENIUS Act (signed July 2025), which establishes federal oversight for payment stablecoins with 100% reserves and supervision by the Fed, OCC, and FDIC. Regulators have withdrawn broad cautions to banks on crypto engagement, while noting dollar-denominated stablecoins could bolster the USD’s global role.

Treasury Secretary Scott Bessent, FSOC chair, emphasized shifting focus from cataloging “vulnerabilities” to promoting long-term economic growth intertwined with stability. The report aligns with President Trump’s pro-crypto policies, including Executive Order revoking prior restrictive frameworks and banning CBDCs.

Industry analysts hail the change as unlocking institutional pathways—easing bank custody, lending, and ETF flows—while ending a three-year “chokehold” on crypto integration. However, the report maintains vigilance on illicit finance, sanctions evasion, and emerging risks like quantum threats to encryption.

Globally, bodies like the Financial Stability Board still flag gaps in oversight, but FSOC’s de-escalation signals U.S. leadership in responsible innovation. This could accelerate mainstream adoption, clearer rules, and investment, positioning crypto as a governed asset class rather than an existential threat. Investors should note volatility persists amid ongoing monitoring.