- Acting FDIC Chair criticized the use of reputation risk as an unfair pretext to prevent banks from servicing crypto companies.
- Critics argued that the 2022 freeze on crypto banking limited innovation and financial inclusion within the digital asset industry.
The Federal Deposit Insurance Corporation (FDIC) is gearing up for a pivotal decision that could alter the relationship between banks and cryptocurrency firms in the U.S.
Amid allegations that regulators used vague “reputation risk” concerns to push banks away from crypto clients—a practice known as debanking—the FDIC board is set to discuss a proposed rule to curb such regulatory practices.
The FDIC announced a notice for an upcoming board meeting to consider a rule forbidding regulators from using “reputation risk” to justify limiting banks’ engagement with certain clients.
Although the agenda did not overtly mention cryptocurrency, acting Chair Travis Hill has repeatedly criticized the use of reputation risk as a pretext to prevent banks from servicing crypto companies or allowing transfers to digital asset exchanges.
This issue has been contentious since before President Donald Trump took office, with digital asset firms claiming they were systematically denied banking access due to political and regulatory pressure.
See Related: Cardano Foundation Partners with Georgia’s National Wine Agency
Trump’s Executive Order And The Political Context
In August, President Trump issued an executive order promising “free banking” and condemning what he described as “politicized or unlawful debanking,” implicitly addressing the crypto sector without naming it explicitly.
The rule under review aims to align the FDIC’s stance with the executive order, potentially dismantling regulatory justifications used to exclude crypto firms from mainstream banking.
Court records released in late 2024 revealed that the FDIC requested some financial institutions to “pause all crypto asset-related activity” during 2022. This campaign, dubbed by some as “Operation Chokepoint 2.0,” has been a political flashpoint, with opponents labeling it an orchestrated crackdown on crypto due to reputational fears.
The policy sparked widespread criticism for limiting innovation and financial inclusion in the digital asset space. Hill’s appointment and the current rule review mark a potential reversal from these restrictive supervisory strategies.
If the FDIC board approves the proposed rule limiting the use of reputation risk in supervisory decisions, banks may face fewer regulatory barriers when engaging with crypto firms, potentially facilitating greater access to conventional banking services for the digital asset sector.
