FSOC Regulatory Powers Restored, Crypto Firms Warned of Potential Systemic Risk Designations
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The Financial Stability Oversight Council (FSOC) can label companies as systemic risks, subjecting them to major new regulations. This power is now back in full effect after being neutered under Trump.
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The FSOC could decide a major crypto company like a stablecoin issuer is a systemic risk like AIG in 2008. This would make them a regulatory ward of the Fed with compliance demands.
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Lawmakers questioned if FSOC plans to sidestep Congress and regulate crypto themselves. They said Congress has crafted a regulatory framework and doesn't need FSOC involvement.
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FSOC's report warned of crypto and stablecoin risks, saying they're prepared to act if comprehensive legislation isn't passed. Lawmakers suggested this was leverage to influence the bills.
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Designating a crypto firm as risky would be a lengthy process FSOC has never used beyond 2008 crisis firms. Lawmakers warned they'll challenge any FSOC crypto designations.