By Kurumi, CryptoCity
Federal Reserve Moves to End Subjective Banking Oversight, Paving Way for Crypto
In a landmark move set to reshape the U.S. financial landscape, the Federal Reserve officially unveiled a rule proposal on February 23rd to permanently remove “reputational risk” as a basis for banking supervision. This initiative formalizes a policy direction first outlined in June 2025, aiming to establish a regulatory framework rooted in transparency and legal evidence rather than subjective judgment.
Under the new proposal, the Fed explicitly prohibits supervisors from pressuring financial institutions to deny services to legitimate businesses or individuals based on concerns about “reputational damage.” This marks a pivotal shift in the U.S. banking industry’s regulatory philosophy, redirecting the focus squarely onto concrete financial risk assessments.
Michelle Bowman, the Federal Reserve’s Vice Chair for Supervision, highlighted the problematic history of “debanking” incidents where regulators used reputational risk to compel financial institutions to exclude customers. These exclusions often stemmed from customers’ political views, religious beliefs, or otherwise lawful business activities. Bowman unequivocally stated that biased, discriminatory practices have no place within the Fed’s regulatory architecture. The new guidelines mandate that oversight concentrate on quantifiable metrics such as credit risk, liquidity risk, and market risk – factors directly pertinent to a financial institution’s safety and soundness.
A New Dawn for Digital Assets: Ending the “Operation Choke Point 2.0” Era
The proposed changes have been met with widespread acclaim, particularly from the digital asset sector. Senator Cynthia Lummis lauded the move, emphasizing that the Federal Reserve should not serve as both judge and jury for digital asset companies. This regulatory correction is seen as a critical step towards ending “Operation Choke Point 2.0,” a perceived effort to stifle legitimate crypto businesses by limiting their access to banking services, and positioning the U.S. as a global leader in digital assets.
This development aligns with recent victories for the crypto industry, including Coinbase’s successful lawsuit against the Federal Deposit Insurance Corporation (FDIC). A court ruled that the FDIC had unlawfully withheld “cease and desist letters” related to crypto activities. The FDIC subsequently paid $188,440 in litigation costs and committed to revising its training materials to prevent the uniform withholding of bank regulatory documents in the future.
Crucially, the Fed’s proposal solidifies a unified stance among the three principal U.S. banking regulators. Both the Office of the Comptroller of the Currency (OCC) and the FDIC have already announced or proposed the abolition of reputational risk reviews. This inter-agency consistency is expected to significantly ease the challenges financial institutions face when opening accounts for cryptocurrency businesses, fostering a more predictable and accessible banking environment.
However, policy expert Sudhakar Lakshmanaraja cautions that banks will continue to weigh the costs associated with anti-money laundering (AML) compliance and the inherent volatility of digital assets. He stresses the ongoing need for Congress to enact formal legislation, such as the proposed CLARITY Act, to guarantee stable banking services for all legitimate industries, including crypto.
Political and Legal Tensions Mount: The Debanking Debate Heads to Court
This regulatory reform unfolds amidst escalating legal and political skirmishes in the United States. Former President Donald Trump has been a vocal proponent of ending politicized debanking policies. Trump previously filed a $5 billion compensation lawsuit against JPMorgan Chase, alleging the bank closed his accounts due to political motivations – a claim JPMorgan acknowledged in court documents while asserting the suit’s invalidity. Concurrently, the crypto industry’s political lobbying efforts have gained traction, exemplified by Crypto.com’s cumulative donations exceeding $35 million to pro-Trump political action committees.
The Federal Reserve’s rule proposal is currently open for a 60-day public comment period, after which it will be finalized as official guidelines. This monumental shift back to legally defined regulations is poised to fundamentally reshape the operational rules of the U.S. financial system. The future regulatory environment promises to be driven by substantive data and legal adherence, rather than the subjective preferences of individual regulators. For the cryptocurrency and blockchain industries, which have long grappled with banking access hurdles, this represents a significant milestone in their journey towards mainstream legitimacy and integration.
不滿遭「政治清算」強制關戶！川普怒告摩根大通、「去銀行化」爭議再起
(The above content is an authorized excerpt and reproduction from our partner, CryptoCity. Original link provided.)
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