The Financial Stability Oversight Council’s (FSOC) 2025 Annual Report, released last week, took a significantly softer approach to crypto assets than previous editions, following years of warning that digital assets posed systemic risks to financial stability.
The 2025 report takes a more measured tone, reflecting regulatory changes that have placed parts of the industry under federal oversight and a shift in political attitudes toward crypto brought on by President Trump’s embrace of the industry. Previous FSOC reports focused heavily on the potential for contagion in crypto markets, highlighting the risks involved in stable coinsweak governance of crypto companies and the threat of illicit financing.
“The Council recommends that member agencies continue to proactively address all outstanding issues related to the supervision and regulation of engagement in digital assets by supervised institutions,” it says.
“This may include issuing clear expectations and/or guidance related to permitted activities (including holding digital assets on balance sheet), custody of digital assets, tokenization, holding stablecoin reserves as deposits, unauthorized use of blockchains, anti-money laundering/counter-terrorist financing (AML/CFT) obligations, third-party relationships, and the opportunity to participate in digital asset pilot programs.”
At the heart of this change is the GENIUS Act, signed into law in July, which establishes a federal framework for stablecoin payment issuers. The FSOC describes the legislation as a source of regulatory clarity designed to encourage stablecoin innovation in the United States while mitigating risks to financial stability.
The FSOC also noted that federal banking agencies have taken steps to clarify that banks may engage in certain activities in cryptoassets, provided that those activities comply with security, soundness, and applicable laws.
These measures include withdrawing two joint statements issued in 2023 that highlighted risks associated with banks’ crypto activities, issuing new guidance on permitted engagements, and removing the expectation that banks notify supervisors and obtain a “no objection” before undertaking certain digital asset activities.
Notably, the 2025 report did not repeat language from last year, warning that stablecoins were extremely vulnerable to runs or that market concentration could amplify systemic risk in the event of the bankruptcy of a dominant issuer. In its 2024 report, the FSOC highlighted that a single company accounted for about 70% of the market value of stablecoins and warned that investor losses could undermine confidence in financial regulation more generally.
What is behind the change in attitude
“What’s changed isn’t that stablecoins suddenly became ‘safe,’ it’s that the U.S. finally put a federal wrapper around them,” said Yan Ketelers, chief marketing officer at human.tech. Decrypt.
“The GENIUS Act gave regulators something concrete to point to: safe harbor rules, disclosures, and clearer accountability. This allowed the FSOC to stop sounding alarmist and start sounding managerial. But that doesn’t mean the underlying risks are gone, it just means they are now treated as governable rather than existential.”
Ketelers said the shift reflects a combination of calmer market conditions, political realignment, and a growing desire by regulators to integrate crypto into the financial system rather than keep it at arm’s length. “You can hear it in the language with less fear of contagion, and more emphasis on integration and competitiveness,” he said. “This is an important indicator. Regulators are no longer content with reacting, they are positioning themselves.”
He cautioned, however, that regulation does not eliminate risk but redistributes it. “The risk has shifted,” Ketelers said. “Once emissions and reserves are regulated, the weak points are not just balance sheets, they are interfaces, custody, identity and control.”
“That’s where the failures will appear next,” he added. “We’ve learned time and time again that systems don’t break down where regulators look at them, but where users actually touch them. »
The FSOC also downplayed concerns about illicit activities compared to previous years. The report states that most on-chain transaction volumes are associated with legitimate activities and that illicit use represents a smaller share of the overall market. While recognizing the need for continued monitoring, the Council emphasizes that law enforcement tools should target criminal abuse without encroaching on lawful activities.
This stance stands in stark contrast to the 2024 report, which cited widespread governance failures at crypto companies, widespread non-compliance with financial regulations, more than $5.6 billion in losses from crypto-related fraud in 2023, and increasing use of stablecoins by terrorist groups.
Crypto around the world
This change in the United States contrasts with that of European regulators, who continue to warn of the systemic risks posed by stablecoins.
In the UK, however, the government has indicated that it will regulate crypto assets from 2027, broadly aligning with the US approach. The Financial Conduct Authority has urged Prime Minister Keir Starmer to prioritize the regulation of stablecoins.
Will Beeson, founder and CEO of Uniform Labs, said Decrypt the American position makes this priority increasingly important. “If you try to oppose stable innovation while the United States promotes it, you risk finding yourself in a weaker position relative to global financial influence,” he said.
