The recent decision by the US Federal Reserve to update its supervisory framework for banks has generated a wave of optimism within the crypto sector. By removing “reputational risk” from its assessment criteria, the Fed is making strides toward a more inclusive financial landscape.
The revision, highlighted in a recent announcement, aims to enhance the transparency of bank assessments. It shifts the focus from subjective concerns over a financial institution’s image to more quantifiable risks associated with banking operations.
This landmark policy change is particularly significant for cryptocurrency companies, many of whom have struggled to secure banking partnerships due to the stigma around their operations, often labeled as “reputationally risky.”
With this update, the Federal Reserve reinforces its commitment to rigorous risk management while maintaining a focus on safety and regulatory compliance for financial institutions.
Importantly, banks retain the latitude to incorporate reputational factors into internal assessments, even as it is no longer a formal criterion in the supervision process.
Transformative Impact on Crypto Banking Relationships
By removing reputational risk from the equation, the Federal Reserve’s decision reflects ongoing calls from various stakeholders, including lawmakers and industry advocates, for greater equity in financial services access.
The crypto sector has long been grappling with obstacles in forming stable banking partnerships. The shockwaves from the 2022 collapse of FTX intensified regulatory scrutiny, complicating relationships even further.
Many companies within the industry reported that banks severed connections primarily due to reputational concerns, a practice sometimes termed “debanking.” This term has become synonymous with the unwarranted exclusion of legitimate businesses from financial services.
Reports of coordinated initiatives by US regulators to obstruct banking relationships with cryptocurrencies led to the rise of the term “Operation Chokepoint 2.0,” initially coined by industry expert Nic Carter. This initiative evokes historical precedents where regulators pressured banks to withdraw services from legally operating sectors deemed politically sensitive.
The Federal Reserve’s move resonates with recent initiatives by both the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), which have also begun to eliminate reputational risk from their protocols.
Support from Legislators and Industry Stakeholders
The Federal Reserve’s transformative policy has garnered applause from key political figures, such as Wyoming Senator Cynthia Lummis, who has been a staunch advocate for digital assets.
In a recent tweet, Lummis hailed the update as a significant victory but emphasized the need for continued efforts to build a fair and stable financial environment that accommodates all industries, specifically within the realm of crypto.
Today, the Fed announced it will scrap reputation risk in bank supervision, addressing policies that negatively affected legitimate digital asset businesses. This is a win, but we have more to accomplish. pic.twitter.com/1FtsIcNJsI
— Senator Cynthia Lummis (@SenLummis) June 23, 2025
This shift in policy also coincides with a bill proposed by Senate Banking Committee Chair Tim Scott, which seeks to formalize the exclusion of reputational risk from bank oversight assessments.
While this adjustment does not guarantee immediate access to banking services for crypto firms, it indicates a welcoming shift that could foster greater financial inclusivity for digital asset operators.
If this policy is consistently implemented, banks may reconsider previously rejected partnerships and explore innovative models that integrate blockchain and cryptocurrency technologies effectively and safely.
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