Nikolas Sargeant
The Federal Reserve announced on June 23 that it will no longer factor "reputational risk" into its bank examinations, joining the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) in ending a supervisory practice that has been widely criticized for enabling crypto debanking. The move represents a significant shift in federal banking oversight and marks the completion of a regulatory rollback initiated under the Trump administration's efforts to combat what officials describe as politically motivated financial discrimination.
The Fed's official statement confirmed that all references to reputational risk will be deleted from its supervision manuals and guidance documents, meaning banks will no longer be penalized based on how bad something looks, even if it's legal and profitable. The central bank ordered staff to strike the term from examination manuals and concentrate on measurable financial exposures instead. This change addresses longstanding complaints from the cryptocurrency industry about the subjective nature of reputational risk assessments that made it difficult for crypto businesses to establish and maintain banking relationships.
Crypto industry leaders have long complained about the difficulty of forging and maintaining banking relationships, with "debanking" occurring when banks terminate accounts deemed risky, such as those with extreme political affiliations or high likelihood for fraud. This banking access challenge has forced many to seek alternative financial solutions through crypto exchanges. The reputational risk framework allowed regulators to pressure banks into severing ties with clients based on perceived brand damage rather than concrete financial risks, creating uncertainty for legitimate businesses operating in emerging sectors like digital assets.
The Federal Reserve was the last of the major banking regulators to eliminate reputational risk from its supervisory framework, following similar moves by the FDIC in March 2025. While no immediate market reaction occurred, analysts project that reduced operational friction will strengthen crypto infrastructure resilience long-term, potentially opening doors for more traditional financial institutions to serve cryptocurrency businesses without fear of regulatory retaliation based on subjective reputation concerns.
