U.S. drops ‘systemic risk’ label for crypto in 2025 policy shift

The Financial Stability Oversight Council (FSOC) has made a dramatic policy shift in its newly released 2025 Annual Report.In a stunning reversal, the council officially removed cryptocurrency from its list of systemic financial threats.Thanks to several policy changes under the Donald Trump administration, the new 86‑page report takes a different approach. It removes earlier warnings and instead places emphasis on responsible growth and regulatory clarity.For context, the 2024 report had focused heavily on the risks posed by stablecoins. It warned of their “vulnerability to runs” and highlighted the threat they posed to market confidence in the absence of proper risk‑management standards.What changed?In the 2025 document, the council now pivots to celebrating digital assets’ critical function, describing them as facilitating “secure, efficient transactions through distributed ledger technology.” The FSOC explicitly credits recent legislative breakthroughs, spearheaded by the enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in July 2025, as the source of regulatory comfort. The act, described as a tool to “incentivize stablecoin innovation in the U.S. while mitigating financial stability risks,” provides the exact framework that regulators previously claimed was missing.The report also highlights a major shift in how federal banking regulators oversee traditional finance’s involvement with digital assets.Additional relief and changesFSOC has systematically withdrawn previous joint statements that focused only on risks, issued new guidance on permissible engagements.Additionally, it has also removed the “no objection” hurdle, allowing banks to engage in certain crypto activities without prior supervisor approval. This operational green light effectively clears banks to move beyond just curiosity. Finally, to complete the transition, the FSOC recommends that its member agencies issue comprehensive guidelines.These guidelines will cover everything from digital asset custody and tokenization standards to the use of permissionless blockchains and clear AML/CFT adherence. This shift confirms the regulatory mindset has moved past mere enforcement and is now focused on structuring integration and maximizing the economic opportunity of a newly de-risked sector.The shift is already yielding resultsThe report directly credits the successful performance of spot Bitcoin [BTC] and Ethereum [ETH] ETFs, and the acceleration of tokenization assets in 2025, as evidence of a maturing market. U.S. regulators are also reinforcing this shift with clearer oversight, including the OCC’s approval of certain crypto activities and preliminary trust charters for Circle, Ripple, and Fidelity Digital Assets.The FSOC notes that while stablecoins still carry some illicit finance risks, most on-chain activity is transparent and legitimate, supporting continued enforcement without restricting legal uses.All this combined shows that the U.S. is now setting a strong global example, though a unified international framework is still a long way off.Financial Stability Board’s warningHowever, this comes at a time when the Financial Stability Board (FSB) issued a thematic review warning that inconsistent global crypto regulation across major economies could still pose risks to global financial stability.While major players such as the U.S. (through the GENIUS Act), the EU (via MiCA), and Singapore are advancing new regulatory frameworks, the FSB noted that only a handful of jurisdictions have fully implemented its 2023 recommendations for crypto‑asset and stablecoin oversight.The result is a fragmented landscape. The UK has aligned with the U.S. model, whereas some European authorities continue to caution against systemic risks. Moving into 2026, this divergence underscores a critical challenge: regulatory arbitrage.In removing the systemic threat designation, the FSOC report signals that, for the world’s largest economy, the domestic debate is over.However, the future stability of the digital asset ecosystem will ultimately hinge on the world’s ability to bridge the “significant gaps” identified by the FSB and establish consistent, borderless guardrails.Final ThoughtsThe shift shows a major change in thinking, recasting digital assets from risks into important parts of today’s financial system.The 2025 report ends the “crypto-as-danger” narrative and confirms that digital assets are now a lasting part of the U.S. financial system.