The Federal Reserve has proposed a significant regulatory shift that could ease long-standing tensions between banks and crypto firms, advancing a rule that would remove “reputation risk” from its supervisory framework.
The proposal is aimed at addressing concerns that federal banking oversight has indirectly encouraged institutions to cut off services to digital asset companies — a practice often described by industry participants as “crypto debanking.” By scrapping reputation risk as a formal supervisory factor, the Fed would narrow its focus to more clearly defined financial risks such as credit, market, liquidity, and operational exposure.
Reputation risk has historically allowed regulators to consider how a bank’s activities might affect public perception or trust in the institution. Crypto advocates and some lawmakers have argued that this broad and subjective standard created room for supervisory pressure on banks to avoid relationships with digital asset firms, even when those firms were operating legally.
Under the proposed change, examiners would no longer cite reputation risk as a standalone basis for supervisory criticism. Instead, concerns would need to be tied directly to measurable safety-and-soundness factors. The move aligns with broader calls in Washington to provide clearer, more transparent standards for how banks engage with emerging financial technologies.
The proposal follows mounting scrutiny from lawmakers who have questioned whether federal regulators coordinated efforts to limit banking access for crypto businesses. Industry leaders have maintained that uncertainty around supervisory expectations has made financial institutions reluctant to serve the sector, stifling innovation and pushing activity offshore.
If adopted, the change could signal a shift toward a more defined risk-based framework for bank-crypto relationships. However, banks would still be expected to manage compliance, anti-money laundering, cybersecurity, and capital requirements when serving digital asset clients.
The rule remains subject to public comment before any final adoption. Market participants will be watching closely to see whether the revision meaningfully improves banking access for crypto firms or primarily clarifies existing supervisory standards without materially altering examiner behavior.
For digital asset companies and their banking partners, the proposal represents a potentially important step toward regulatory clarity in the evolving U.S. crypto landscape.