The Federal Reserve announced a significant policy change that could facilitate crypto companies’ access to traditional banking services. On Monday, the Fed eliminated “reputational risk” from its bank supervision criteria, a vague standard that previously discouraged banks from engaging with crypto businesses.
Instead of subjective concerns about reputation, the Fed will now concentrate on clear financial risks such as liquidity, credit, and legal exposure. This adjustment aligns the Fed’s approach with that of other regulators like the FDIC and OCC, which have already moved away from using reputation as grounds to restrict certain industries.
- Banks no longer require special approval to provide services related to crypto or stablecoins.
- Crypto businesses will be treated like any other clients under bank regulations.
- The change encourages traditional banks to re-enter the crypto market without fearing regulatory repercussions.
Previously, banks avoided crypto clients due to fears their association could raise regulatory alarms based on image rather than financial factors. Now, banks must still manage actual risks but will not be penalized solely for serving crypto customers, potentially opening the door for renewed banking partnerships in the sector.
The Fed also rescinded requirements for banks to notify regulators in advance when engaging with crypto or stablecoin services. These activities will be assessed under standard business reviews moving forward.
This development addresses longstanding challenges faced by crypto startups and exchanges, many of which struggled to maintain banking relations amidst undefined regulatory concerns. The move comes after 2023’s collapse of prominent crypto-friendly banks, signaling a cautious but positive shift.
The crypto community has reacted positively. Senator Cynthia Lummis described the change as a “win,” though she notes further efforts are needed. Michael Saylor, MicroStrategy’s co-founder, highlighted that banks are now free to support Bitcoin.
This adjustment is part of a broader trend of regulators easing stringent measures enacted during the crypto boom, favoring transparent, risk-based frameworks over unclear warnings. The industry seeks fair banking access, clear guidelines, and growth opportunities without default stigma.
While the Fed’s update does not end ongoing debates—legislation to prohibit reputational risk usage is still pending in Congress—it signals a meaningful step toward integrating crypto into mainstream finance.