Digital assets have vanished from government “vulnerability” list, officially ending a three-year regulatory chokehold on US banks

The Financial Stability Oversight Council’s (FSOC) 2025 annual report dropped digital assets from its list of financial-system vulnerabilities, ending three years of high-alert posture that framed crypto as a budding contagion channel requiring new legislation and cautious bank supervision.

The word “vulnerability” disappeared from the table of contents entirely. Digital assets moved into a neutral “significant market developments to monitor” category, described not as systemic threats but as a growing sector with increasing institutional participation through spot Bitcoin and Ethereum ETFs and tokenization of traditional assets.

The shift is structural, not cosmetic. FSOC’s 2022 report under former President Joe Biden’s Executive Order 14067 concluded that “crypto-asset activities could pose risks to the stability of the US financial system” and called for fresh legislation on spot markets and stablecoins.

The 2024 report classed digital assets under vulnerabilities and warned that dollar stablecoins “continue to represent a potential risk to financial stability because they are acutely vulnerable to runs” without bank-like prudential standards.

The 2025 report reverses that framing, explicitly noting that US regulators have “withdrawn previous broad warnings” to financial institutions about crypto involvement and suggesting that the growth of dollar stablecoins will likely support the dollar’s international role over the next decade.

Treasury Secretary Scott Bessent’s cover letter redefines FSOC’s mission, arguing that cataloguing vulnerabilities “is not sufficient” and that long-term economic growth is integral to financial stability.

Bitcoin heads into 2026 with the US macroprudential gatekeeper stepping back from systemic-risk language just as ETF channels, bank plumbing, and stablecoin rails are being formalized.

Parallel moves that make this policy, not rhetoric

Three 2025 shifts confirm that the reversal is coordinated across agencies, not isolated to a single report.

First, the White House pivot. President Donald Trump’s Executive Order 14178 revoked Biden’s crypto EO and set explicit policy “to support the responsible growth and use of digital assets” while banning a US central bank digital currency.

The follow-on Digital Assets Report reads as an industrial policy, emphasizing tokenization, stablecoins, and US leadership rather than containment.

Second, Congress provided the regulatory framework FSOC had demanded. The GENIUS Act, signed in July 2025, creates “permitted payment stablecoin issuers,” requires 100% backing, and grants primary oversight to the Fed, the OCC, the FDIC, and state regulators.

That gives FSOC grounds to stop treating stablecoins as unregulated systemic threats and instead monitor them as supervised dollar infrastructure with specific run and illicit-finance risks.

Third, bank re-engagement is being unclogged at the agency level. In January 2025, the SEC rescinded SAB 121 via SAB 122, removing guidance that required custodial crypto assets to be recorded on banks’ balance sheets as liabilities.

The OCC issued Interpretive Letter 1188, allowing national banks to act as intermediaries in “riskless principal” crypto transactions, simultaneously buying from one customer and selling to another without open positions.

Separate OCC guidance permits banks to hold small amounts of native tokens to pay gas fees for custody or stablecoin operations. The OCC then granted preliminary national trust bank charters to Circle, Ripple, BitGo, Paxos, and Fidelity Digital Assets, allowing them to operate as federally supervised trust banks.

FSOC’s statutory role adds weight to the timing. Congressional Research Service guidance notes that each council member must either attest that “all reasonable steps to address systemic risk are being taken” or explain what more is needed in the annual report.

When that report stops calling digital assets a vulnerability, the same year SAB 121 is rescinded, a stablecoin law is enacted, and the OCC opens doors to crypto-native banks, it signals coordinated de-escalation rather than isolated messaging.

What remains cautious

Global watchdogs have not followed FSOC’s lead. The Financial Stability Board’s October 2025 review noted crypto’s global market cap roughly doubled to $4 trillion and warned of “significant gaps” and “fragmented, inconsistent” implementation of its 2023 crypto standards.

The FSB judges financial stability risks “limited at present” but rising with interconnection and stablecoin use.

The Financial Action Task Force’s June 2025 update flagged that only 40 of 138 jurisdictions are “largely compliant” with its crypto anti-money-laundering rules and pointed to tens of billions in illicit flows, arguing that failures in one jurisdiction create global consequences.

Even FSOC’s 2025 report maintains that dollar stablecoins can be abused for sanctions evasion and illicit finance, calling for continued monitoring and enforcement.

The de-escalation applies to systemic-risk framing, not to AML or sanctions compliance.

Implications for Bitcoin in 2026

FSOC’s decision to drop “vulnerability” language removes macroprudential stigma that made large banks, insurers, and pension funds wary of crypto exposure beyond indirect holdings.

It does not mandate Bitcoin allocations, but it lowers the likelihood that new systemically important financial institution rules or blunt supervisory guidance will choke off ETF, custody, or lending channels in the name of systemic risk.

The SEC’s spot Bitcoin and Ethereum ETF approvals in 2024, combined with the queue of additional crypto ETF filings in 2025, normalized listed exposure to BTC at an institutional scale.

FSOC’s new tone treats those ETFs as a market structure to monitor rather than a contagion channel requiring caps.

The GENIUS Act and OCC’s riskless-principal guidance give US-regulated banks a cleaner legal path to operate in the plumbing layer: holding stablecoin reserves, intermediating flows between BTC ETFs and stablecoin rails, and tokenizing collateral.

That infrastructure is the channel through which Bitcoin’s macro-asset role scales in 2026, not because FSOC endorses BTC, but because systemic-risk concerns are being replaced by standard prudential and AML oversight.

The policy shift does not immunize Bitcoin from political swings. Congress could revisit market-structure rules. The SEC and CFTC continue to dispute jurisdiction over tokens other than Bitcoin or Ethereum.

Global regulators warn that crypto-traditional linkages may pose real stability issues if the market keeps doubling. FATF and FSB reports suggest that international coordination on AML and cross-border flows will tighten regardless of the US de-escalation of systemic risk.

The risk for Bitcoin in 2026 has shifted from outright prohibition toward policy whiplash.

FSOC’s reversal opens institutional channels just as election-year politics could disrupt them. The council’s willingness to downgrade crypto from “vulnerability” to “development” reflects confidence that existing supervisory tools can handle current exposures.

That confidence holds as long as spot ETF flows remain orderly, stablecoin issuers maintain full backing, and no major custody or bridge failure forces regulators to revisit whether crypto’s integration into traditional finance has outpaced oversight capacity.

Bitcoin enters 2026 with a regulatory permission structure in place.

The test is whether that structure survives the next stress event or whether FSOC’s “significant development to monitor” language proves to be a placeholder that reverts to “vulnerability” the moment something breaks.

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