For years, crypto companies watched helplessly as banks shut their doors on them—not because of bad finances, but because of who they were. Now, the US Federal Reserve wants to make sure that never happens again.
The Fed has put forward a proposal to permanently remove “reputation risk” from its bank supervision rules. It has given the public 60 days to share feedback on the plan.
What Was the Problem?
Earlier, bank supervisors could push financial institutions to cut ties with certain customers simply because of how those customers looked on paper—not because they posed any real financial threat. Crypto firms, conservative groups, and other legal businesses regularly lost banking access without any clear explanation.
Fed Vice Chair for Supervision Michelle Bowman called the old standard vague and one-sided. She said it pulled supervisors away from tracking real financial risks like credit and liquidity. “Discrimination by financial institutions on these bases is unlawful,” she said.
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This new rule builds on the June 2025 announcement that reputational risk would no longer be a component of examination programs in the supervision of banks. The new proposal would make this change official through new rules. It would stop the Federal Reserve Board from pushing or forcing banks to refuse services to people or businesses just because of:
- Their constitutionally protected activities (like free speech, religion, or political beliefs), or
- Their involvement in lawful but politically unpopular businesses that some might see as creating “reputation risk.”
It would also make supervision clearer and more consistent overall, focusing on real financial risks instead of subjective reputation concerns.
Industry and Lawmakers Back the Move
Senator Cynthia Lummis, who once held up a Fed handbook during a Senate hearing to show how reputation risk was weaponized against crypto firms, said the proposal was long overdue. She argued the Fed had no business deciding which lawful industries deserve a bank account.
Galaxy Digital researcher Alex Thorn said it was another step toward dismantling what the crypto world calls Operation Choke Point 2.0—a term for what many believe was a deliberate effort under the Biden administration to push crypto businesses out of mainstream banking.
President Donald Trump, currently locked in a $5 billion legal battle with JP Morgan over alleged politically motivated account closures, has separately pushed regulators to look into debanking complaints from crypto firms and conservative groups.
