A key development has emerged in the long-running debate over crypto debanking in the United States. The Federal Reserve Board has proposed permanently eliminating “reputation risk” from the factors used in bank supervision. The change aims to prevent supervisors from pressuring banks to cut ties with legally operating but politically sensitive businesses, including crypto companies.
Vice Chair for Supervision Michelle W. Bowman stated that there have been troubling examples of financial institutions excluding clients based on political views, religious beliefs, or participation in lawful yet controversial industries. Bowman emphasized that such discriminatory practices are unlawful and should have no place in the Federal Reserve’s supervisory approach. Last year, the Office of the Comptroller of the Currency similarly removed “reputation risk” from its oversight criteria.
The proposal explicitly states that supervisors may not encourage banks to deny services to customers engaged in “politically disfavored but lawful” activities. The language is broad enough to cover crypto firms and stablecoin issuers. The Fed also indicated that, once separate regulatory processes are finalized, entities issuing permitted payment stablecoins could be included within the definition of supervised banking organizations. The 60-day public comment period, which began on Feb. 23, could ultimately shape how crypto companies access the U.S. financial system.
