The US Federal Reserve (Fed) has officially eliminated the concept of “reputational risk” from its bank supervision framework, a significant shift anticipated to enhance banking access for cryptocurrency enterprises. This policy update was disclosed in a press release on 23 June 2025.
In an ongoing effort to modernise its oversight protocols, the Fed is currently revising its examination manuals and supervisory documents to remove all mentions of reputational risk, opting for clearer and more specific criteria when appropriate. The Fed has also committed to training its examiners and collaborating with relevant federal agencies to ensure a consistent implementation of these updates across the banking industry.
Despite this move, the Fed has clarified that it still expects banks to uphold robust risk management practices to ensure operational safety, regulatory compliance, and soundness, reinforcing that internal reputational considerations may still be utilised by banks.
Following suit, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC) have also ceased their reputational risk assessments during bank examinations. This coordinated effort among regulatory bodies represents a broader transition away from subjective supervisory metrics that have previously hindered financial innovation, particularly within the digital asset sector.
### Positive Reception from the Crypto Industry
The recent changes have garnered praise from proponents of the cryptocurrency industry, including Senator Cynthia Lummis, who hailed this development as a “win”. She remarked on social media that previous reputational risk policies had severely impacted digital currency businesses. Caitlin Long, an advocate from Custodia Bank, echoed her sentiments, suggesting that this marks progress in addressing discriminatory banking practices, such as the phenomenon of debanking.
Debanking remains a crucial issue for cryptocurrency firms, many of which have faced ongoing challenges in securing banking relationships due to perceived reputational risks. The situation exacerbated following the collapse of the cryptocurrency exchange FTX, leading to accusations that regulators and the Biden administration were discouraging banks from engaging with digital asset firms. Critics have termed this alleged strategy “Operation Chokepoint 2.0,” viewing it as an unofficial approach to marginalising the cryptocurrency sector by restricting its access to traditional banking services.
The Fed’s policy change, therefore, is not just a technical amendment but a vital step towards fostering a more inclusive financial environment for cryptocurrency businesses, potentially easing their path towards greater integration within the established banking system. As the regulatory landscape continues to evolve, the implications of these changes will be closely watched by both market participants and regulators alike.
With the removal of subjective risk assessments, the focus now shifts more towards quantifiable aspects of risk management, paving the way for innovations that could see cryptocurrencies more widely accepted in mainstream finance. The journey ahead will be significant for the evolving relationship between cryptocurrency and traditional finance, particularly in exploring how regulatory frameworks will adapt to accommodate rapid technological advancements in the sector.
