Financial Stability Oversight Council Report Softens Cryptocurrency Stance in 2025

The Financial Stability Oversight Council (FSOC)’s 2025 Annual Report, released last week, took a significantly softer approach to crypto assets than previous editions, after years of warning that digital assets pose systemic risks to financial stability.

The 2025 report adopts a more cautious tone, reflecting regulatory changes that have brought parts of the industry under federal oversight and changing political attitudes toward cryptocurrencies brought about by President Trump’s support for the industry. Previous FSOC reports focused on the potential for contagion from the crypto market and highlighted run risks. stable coinWeak Governance of Cryptocurrency Companies and the Threat of Illegal Finance.

“The Board encourages member institutions to continue to proactively address outstanding issues related to supervisory authority oversight and regulation of digital asset engagement.”

“This could include further issuance of clear expectations and guidance regarding permissible activities (including holding digital assets on balance sheets), custody of digital assets, tokenization, holding stablecoin reserves as deposits, use of permissionless blockchains, anti-money laundering/combining the financing of terrorism (AML/CFT) obligations, relationships with third parties, and the ability to participate in digital asset pilot programs.”

Central to that change is the GENIUS Act, enacted in July, which establishes a federal framework for payment stablecoin issuers. FSOC describes the bill as a source of regulatory clarity aimed at fostering stablecoin innovation in the United States while mitigating financial stability risks.

FSOC also noted that federal banking agencies are taking steps to clarify that banks may engage in certain crypto-asset activities as long as they are safe, sound, and comply with current law.

These actions include rescinding two joint statements issued in 2023 that highlighted the risks associated with banks’ cryptocurrency activities, issuing new guidance on permissible transactions, and removing the expectation that banks should notify their supervisors and obtain their “no objection” consent before undertaking certain digital asset-related activities.

Notably, the 2025 report does not repeat language from last year that warned that stablecoins are highly vulnerable to crashes or that market concentration could amplify systemic risk if a dominant issuer fails. In its 2024 report, FSOC highlighted that a single company accounts for around 70% of stablecoin market value and warned that investor losses could undermine confidence in financial regulation more broadly.

What is behind the change in attitude

“What changed is not that stablecoins suddenly became ‘safe,’ but that the US finally put a federal wrapper on stablecoins,” said Jan Ketterers, CMO at human.tech. decryption.

“The GENIUS Act gave regulators something concrete: reservation provisions, disclosure, and clearer accountability. It made FSOC sound less alarmist and more managerial. But that doesn’t mean the underlying risks have disappeared, just that they are now treated as governable rather than existential.”

Ketterers said the changes reflect calmer market conditions, political realignment and regulators’ increasing willingness to integrate cryptocurrencies into the financial system rather than keeping them independent. “You can hear it in language that reduces the fear of contagion and focuses more on integration and competitiveness,” he said. “This is a huge implication. Regulators are no longer just reacting, they are positioning themselves appropriately.”

However, he cautioned that regulation does not eliminate risk, but rather redistributes it. “The risk has shifted,” Ketterers said. “Once issuers and reserves are regulated, weaknesses extend beyond balance sheets to interfaces, custody, identity and control.”

“That’s where the next failure appears,” he added. “We have learned over and over again that systems don’t break where regulators watch them, they break where users touch them.”

The FSOC also downplayed concerns about illegal activity compared to previous years. The report states that most of the on-chain transaction volume is related to legitimate activities, with fraudulent use accounting for a small portion of the overall market. While acknowledging the need for continued monitoring, the Council emphasizes that enforcement tools should target criminal abuse without compromising legitimate activity.

This stance is in sharp contrast to a 2024 report that cited widespread governance failures among crypto companies, widespread non-compliance with financial regulations, more than $5.6 billion in crypto-related fraud losses in 2023, and increased use of stablecoins by terrorist groups.

Cryptocurrency around the world

The US changes stand in contrast to European regulators, who continue to warn about the systemic risks posed by stablecoins.

However, in the UK, the government has announced plans to regulate crypto assets from 2027, largely in line with the US approach. The Financial Conduct Authority has called on Chancellor Keir Starmer to prioritize stablecoin regulation.

Will Beeson, Founder and CEO of Uniform Labs, said: decryption The US position makes such priorities all the more important. “While the United States is promoting stablecoin innovation, if we try to oppose stablecoin innovation, we risk making ourselves vulnerable relative to global financial influence,” he said.