Regulatory Shift Seen as Major Win for Crypto Firms in U.S.
The U.S. Federal Reserve has announced a significant policy shift by eliminating “reputational risk” from its supervisory framework — a move widely seen as a direct response to longstanding complaints from the crypto industry. The decision addresses concerns that vague regulatory standards had been used to debank crypto and fintech firms under a practice critics called “Operation Chokepoint 2.0.”
Over 30 crypto and tech firms were denied banking access in the wake of crypto-friendly bank collapses in 2023.
What’s Changing?
In a statement released Monday, the Fed said it will remove references to reputational risk from its official guidance and replace them with more concrete criteria focused on financial risk. Supervisors will also undergo new training to ensure consistent application across all institutions.
The Federal Reserve clarified that banks must still maintain strong risk controls and comply with existing laws.
While banks can continue to consider reputational factors in internal risk management, the Fed will no longer use it as a regulatory enforcement standard. This shift aims to restore fairness and transparency, particularly for industries unfairly labeled as risky, including crypto businesses.
Industry Reaction: Applause and Caution
Senator Cynthia Lummis, a vocal pro-crypto lawmaker, called the update a long-overdue correction:
“Reputation risk policies assassinated American Bitcoin & digital asset businesses. This is a win, but more work remains,” she stated.
Rob Nichols, CEO of the American Bankers Association, welcomed the move, emphasizing that market forces and sound financial practices — not regulatory biases — should drive banking decisions.
“Banks should be free to engage with legal businesses, including crypto, based on financial due diligence,” Nichols said.
Critics Sound Alarm
However, some regulators and watchdogs argue that removing reputational risk could allow banks to ignore non-financial threats, such as ethical concerns or long-term trust issues, potentially weakening overall oversight.
A Broader Regulatory Trend
This is the latest sign that U.S. regulators are retreating from their hardline stance on crypto:
- The FDIC said in March that banks can engage in crypto activities without prior approval.
- The OCC confirmed in May that federally chartered banks may now offer crypto trading services and outsource digital asset functions.
This rollback may help rebuild bridges between U.S. banks and crypto companies, fostering financial innovation under clearer, more predictable rules.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.