A pivotal shift in US regulatory policy is set to redefine the future of digital assets and banking. For the past three years, the Financial Stability Oversight Council (FSOC) classified cryptocurrencies as a "vulnerability" to the US financial system, demanding new legislation and cautious bank supervision. Now, in a remarkable reversal detailed in its 2025 annual report, FSOC has removed digital assets from this list entirely.
This isn't just a change in wording; it signifies a fundamental re-evaluation. Digital assets are no longer seen as a systemic threat but as a "significant market development to monitor." This new framing acknowledges the sector's growth and increasing institutional participation, particularly through spot Bitcoin and Ethereum ETFs and the tokenization of traditional assets. This move effectively ends a period of intense regulatory scrutiny and signals a new era for integrating digital assets into mainstream finance.
From Threat to Opportunity: FSOC's Policy Evolution
The contrast with previous years is striking. FSOC's 2022 report, influenced by President Biden's Executive Order 14067, warned that "crypto-asset activities could pose risks to the stability of the US financial system" and urged new legislation. By 2024, digital assets were still flagged as vulnerabilities, with specific concerns raised about dollar stablecoins being "acutely vulnerable to runs" without robust prudential standards.
The 2025 report completely reverses this stance. It explicitly notes that US regulators have "withdrawn previous broad warnings" to financial institutions regarding crypto involvement. Treasury Secretary Scott Bessent's cover letter emphasizes economic growth as integral to financial stability, moving beyond merely cataloging vulnerabilities. This strategic pivot comes as ETF channels, bank infrastructure, and stablecoin rails are becoming increasingly formalized.
“The council’s willingness to downgrade crypto from ‘vulnerability’ to ‘development’ reflects confidence that existing supervisory tools can handle current exposures.”
Washington's Coordinated De-escalation
This shift is not isolated; it’s a coordinated de-escalation across multiple federal entities:
- White House Policy Reset: President Donald Trump's Executive Order 14178 revoked Biden’s earlier crypto EO, explicitly aiming to "support the responsible growth and use of digital assets" and banning a US central bank digital currency. The subsequent Digital Assets Report outlines an industrial policy focused on tokenization, stablecoins, and US leadership.
- Congressional Clarity: The GENIUS Act, signed in July 2025, provides a clear regulatory framework for stablecoins. It establishes "permitted payment stablecoin issuers," mandates 100% backing, and grants primary oversight to key financial regulators like the Fed, OCC, and FDIC. This legislation transforms stablecoins from perceived unregulated threats into supervised dollar infrastructure.
- Banking Sector Re-engagement: Agencies are actively removing barriers for banks.
- The SEC rescinded SAB 121 via SAB 122 in January 2025, removing the requirement for banks to record custodial crypto assets as liabilities on their balance sheets.
- The OCC issued Interpretive Letter 1188, permitting national banks to act as intermediaries in "riskless principal" crypto transactions. Additional OCC guidance allows banks to hold small amounts of native tokens for operational fees.
- The OCC further granted preliminary national trust bank charters to major digital asset firms (Circle, Ripple, BitGo, Paxos, Fidelity Digital Assets), allowing them to operate as federally supervised trust banks.
This synchronized timing, with FSOC’s report aligning with SEC, OCC, and Congressional actions, strongly suggests a deliberate policy shift rather than disparate announcements.
Global Perspectives and Remaining Challenges
Despite US moves, global financial bodies remain more cautious. The Financial Stability Board (FSB) noted crypto's global market cap nearly doubled to $4 trillion by October 2025, warning of "significant gaps" and "fragmented" regulatory implementation. The Financial Action Task Force (FATF) reported in June 2025 that only 40 of 138 jurisdictions are "largely compliant" with crypto anti-money laundering (AML) rules, highlighting billions in illicit flows. Even FSOC’s 2025 report acknowledges the potential for dollar stablecoins to be abused for sanctions evasion and illicit finance, calling for continued monitoring. This confirms the de-escalation focuses on systemic risk, not on AML or sanctions compliance.
Implications for Bitcoin and the Path Ahead
FSOC's removal of "vulnerability" language significantly reduces macroprudential stigma, easing institutional hesitation towards crypto. While not mandating Bitcoin allocations, it lowers the risk of new rules stifling ETF, custody, or lending channels under systemic risk concerns.
The SEC’s 2024 approvals of spot Bitcoin and Ethereum ETFs, alongside further filings in 2025, have normalized institutional BTC exposure. FSOC's new stance views these ETFs as market structures to monitor, not contagion channels to cap. The GENIUS Act and OCC guidance offer US-regulated banks a clearer path to operate in the digital asset plumbing: managing stablecoin reserves, facilitating ETF flows, and tokenizing collateral. This infrastructure is vital for Bitcoin's scaling as a macro-asset, driven by a shift from systemic-risk concerns to standard prudential and AML oversight.
Nevertheless, Bitcoin remains susceptible to political shifts. Congressional actions could revisit market rules, and jurisdictional disputes between the SEC and CFTC persist. Global regulators caution that growing crypto-traditional linkages might pose stability issues if the market continues to expand rapidly. International coordination on AML will likely tighten.
The risk for Bitcoin in 2026 shifts from outright prohibition to potential policy whiplash. FSOC's newfound confidence in existing supervisory tools hinges on orderly ETF flows, full stablecoin backing, and no major custody failures. Bitcoin enters 2026 with a regulatory permission structure in place, but its resilience will be tested by future market stresses. This moment is a significant step forward, but vigilance remains key.
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