FSOC drops crypto assets from financial vulnerabilities list in latest report

The Financial Stability Oversight Council (FSOC) has removed crypto assets from its list of potential vulnerabilities to the U.S. financial stability in the 2025 report. The report now emphasizes sustainable economic growth as a crucial component of financial stability. 

Treasury Secretary Scott Bessent, who chairs the FSOC, said that monitoring vulnerabilities alone is insufficient for financial stability; instead, sustainable long-term economic growth and economic security are interdependent with stability. The 2025 FSOC report eliminated the term “vulnerabilities” from its table of contents and reduced emphasis on identifying the systemic dangers of digital assets. 

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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