This update, detailed in a release on Monday, is intended to make bank assessments more transparent by focusing on concrete financial risks rather than subjective or image-based concerns.
The revision is seen as a potential step forward for crypto asset firms, which have frequently reported being denied access to banking services due to perceived reputational concerns.
The board clarified that while reputational risk will no longer be part of formal supervision criteria, banks are still free to consider it within their internal risk frameworks.
The elimination of reputational risk from federal bank supervision comes after growing pressure from lawmakers and industry participants who argue that digital asset firms have been unfairly excluded from essential financial services.
Many in the industry cited instances where banks severed ties with crypto businesses under the justification of reputational risk, a process sometimes referred to as “debanking.”
The term draws from a similar initiative a decade ago, where regulators allegedly pressured banks to cut off services to legally operating but politically sensitive sectors.
The decision by the Federal Reserve has been welcomed by key political figures, including Wyoming Senator Cynthia Lummis, a vocal supporter of digital assets.
While this change doesn’t automatically open the doors for crypto firms to access banking services, it signals a shift in tone that could lead to greater financial inclusion for digital asset companies.
Featured image created with DALL-E, Chart from TradingView
