The Financial Stability Oversight Council’s (FSOC) 2025 annual report, released last week, has taken 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 adopts a more measured tone, reflecting regulatory changes that have brought parts of the industry under federal supervision and a shift in political attitudes to crypto brought about by President Trump’s embrace of the industry. Earlier FSOC reports focused heavily on the potential for contagion from crypto markets, highlighting run risks in stablecoins, weak governance at crypto firms and the threat of illicit finance.
“The Council recommends that member agencies continue to proactively address any outstanding issues related to supervision and regulation of digital asset engagement by supervised institutions,” it said.
“This may include further issuance of clear expectations and/or guidance related to permissible activities (including holding digital assets on the balance sheet), digital asset custody, tokenization, holding stablecoin reserves as deposits, use of permissionless blockchains, anti-money laundering/countering the financing of terrorism (AML/CFT) obligations, third-party relationships, and the ability to participate in digital asset pilot programs.”
Central to that shift is the GENIUS Act, enacted in July, which establishes a federal framework for payment stablecoin issuers. FSOC describes the legislation as a source of regulatory clarity designed to incentivize stablecoin innovation in the U.S. while mitigating financial stability risks.
The FSOC also noted that federal banking agencies have taken steps to clarify that banks may engage in certain crypto-asset activities, so long as those activities are consistent with safety, soundness, and existing laws.
Those steps include withdrawing two joint statements issued in 2023 that emphasized risks associated with banks’ crypto activities, issuing new guidance on permissible engagements, and removing the expectation that banks notify supervisors and obtain a “no objection” before undertaking certain digital asset-related activities.
Notably, the 2025 report does not repeat language from last year warning that stablecoins were acutely vulnerable to runs or that market concentration could amplify systemic risk if a dominant issuer failed. In its 2024 report, the FSOC highlighted that a single firm accounted for roughly 70% of stablecoin market value and warned that investor losses could undermine confidence in financial regulation more broadly.
What’s behind the shift in attitudes
“What changed isn’t that stablecoins suddenly became ‘safe,’ it’s that the U.S. finally put a federal wrapper around them,” Yan Ketelers, CMO at human.tech, told Decrypt.
“The GENIUS Act gave regulators something concrete to point to: reserve rules, disclosures, and clearer accountability. That let FSOC stop sounding alarmist and start sounding managerial. But that doesn’t mean the underlying risks disappeared, it just means they’re now being treated as governable rather than existential.”
Ketelers said the shift reflects a combination of calmer market conditions, political realignment, and a growing willingness among 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, more focus on integration and competitiveness,” he said. “That’s a big tell. Regulators aren’t just reacting anymore, they’re positioning.”
He cautioned, however, that regulation does not eliminate risk but redistributes it. “The risk has moved,” Ketelers said. “Once issuers and reserves are regulated, the weak points aren’t just balance sheets, they’re interfaces, custody, identity, and control.”
“That’s where failures will show up next,” he added. “We’ve learned over and over that systems don’t break where regulators are looking, they break where users actually touch them.”
The FSOC also downplayed concerns about illicit activity compared with prior years. The report states that most on-chain transaction volume is associated with legitimate activity and that illicit use represents a smaller share of the overall market. While acknowledging the need for continued monitoring, the Council emphasizes that enforcement tools should target criminal misuse without infringing on lawful activity.
That stance contrasts sharply with the 2024 report, which cited widespread governance failures at crypto firms, extensive noncompliance with financial regulations, more than $5.6 billion in crypto-related fraud losses in 2023, and increasing use of stablecoins by terrorist groups.
Crypto around the world
The shift in the U.S. stands in contrast to European regulators, who continue to warn about the systemic risks posed by stablecoins.
In the UK, however, the government has signaled that it will regulate crypto assets from 2027, broadly aligning with the U.S. approach. The Financial Conduct Authority has urged Prime Minister Keir Starmer to prioritize stablecoin regulation.
Will Beeson, founder and CEO of Uniform Labs, told Decrypt the U.S. stance makes such prioritization increasingly important. “If you’re trying to oppose stablecoin innovation while the U.S. promotes it, you risk finding yourself in a weaker position relative to global financial influence,” he said.
