US Fed Just Quietly Removed a Major Barrier to Crypto Banking, Here’s What That Means

The US Federal Reserve has announced a significant change that affects crypto positively in its examination framework for banks by removing “reputational risk” from its supervisory guidelines.

This update, detailed in a release on Monday, is intended to make bank assessments more transparent by focusing on concrete financial risks rather than subjective or image-based concerns.

The revision is seen as a potential step forward for crypto asset firms, which have frequently reported being denied access to banking services due to perceived reputational concerns.

According to the Federal Reserve, this policy update is aimed at reinforcing the quantitative and qualitative aspects of how banks manage risk, without undermining the central bank’s expectations for safety, soundness, or regulatory compliance.

The board clarified that while reputational risk will no longer be part of formal supervision criteria, banks are still free to consider it within their internal risk frameworks.

Implications for Crypto and the End of ‘Debanking’?

The elimination of reputational risk from federal bank supervision comes after growing pressure from lawmakers and industry participants who argue that digital asset firms have been unfairly excluded from essential financial services.

The crypto industry has long faced hurdles in establishing reliable banking relationships, particularly after the 2022 collapse of FTX, which led to heightened regulatory scrutiny.

Many in the industry cited instances where banks severed ties with crypto businesses under the justification of reputational risk, a process sometimes referred to as “debanking.”

The situation intensified amid claims of coordinated efforts by US regulators to discourage banking relationships with crypto firms, a scenario dubbed “Operation Chokepoint 2.0” by Castle Island Ventures co-founder Nic Carter.

The term draws from a similar initiative a decade ago, where regulators allegedly pressured banks to cut off services to legally operating but politically sensitive sectors.

The Federal Reserve’s latest move aligns with recent actions by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), both of which have also taken steps to remove reputational risk considerations from their oversight procedures.

Legislative Support and Industry Response

The decision by the Federal Reserve has been welcomed by key political figures, including Wyoming Senator Cynthia Lummis, a vocal supporter of digital assets.

In a recent post on X, Lummis called the policy change “a win,” but emphasized that further work is needed to create a stable and fair banking environment for all industries, including crypto.

In February, I exposed the Fed’s aggressive reputation risk policies that assassinated American bitcoin & digital asset businesses. Today, the Fed announced it will scrap reputation risk as a factor in its bank supervision. This is a win, but there is still more work to be done. https://t.co/AOZSr0IFcp pic.twitter.com/1FtsIcNJsI

— Senator Cynthia Lummis (@SenLummis) June 23, 2025

The policy shift also follows a bill introduced in March by Senate Banking Committee Chair Tim Scott aimed at codifying the exclusion of reputational risk from bank examinations.

While this change doesn’t automatically open the doors for crypto firms to access banking services, it signals a shift in tone that could lead to greater financial inclusion for digital asset companies.

If implemented consistently, this revision could also encourage banks to re-evaluate previously halted partnerships and explore new service models that incorporate blockchain and digital asset technologies in a compliant and structured manner.

Featured image created with DALL-E, Chart from TradingView