The Federal Reserve just removed its “reputational risk” guideline for supervising banks, which was a major tool for debanking crypto firms. This surprising breakthrough could help encourage more integration of TradFi and Web3.
To be clear, the Fed didn’t explicitly frame this as a win for crypto, and its brief statement never addressed the industry. Still, this rule change can encourage a broad shift in institutional attitudes.
SponsoredThe Era of Crypto Debanking Ends
The banking sector and crypto industry have had a troubled history over the past few years, but it’s not necessarily the banks’ fault.
Federal regulators waged a campaign of debanking against the crypto industry, greatly discouraging cooperation between these sectors. However, this damage is being reversed, and the industry won an important win today:
According to the Fed’s newest press release, reputational risk will “no longer be a component” of its supervision of banks. To be clear, the document doesn’t directly refer to crypto or debanking in any capacity.
Nonetheless, it’s easy to read between the lines to call this an important regulatory success for crypto for a few reasons.
First of all, the Federal Reserve was the last major institution to keep this tool open. The FDIC scrapped a similar rule in March, which David Sacks called a “big win” against crypto debanking.
Indeed, several regulators formerly had reputational risk rules in force, enabling massive harassment campaigns against crypto leaders. That period is officially over.
Also, this move shifts banking regulations away from discretionary, values-driven enforcement and toward transparent, evidence-based supervision.
This could help institutional crypto adoption, as banks might feel more confident engaging with digital asset clients under clearer supervisory expectations.
SponsoredIn other words, this rule change will encourage crypto and TradFi to move on from the legacy of debanking. This won’t guarantee new cooperation, but it’ll allow banks to assess potential crypto clients more objectively.
By removing a legal barrier, the Fed is enabling banks to confidently engage with Web3.
Several major investment banks are already interested in the sector, so this incentive could accelerate existing trends.
Operation Choke Point 2.0 and the debanking era were a traumatizing time for crypto, but a new day is already here. There are plentiful opportunities to create a new ecosystem with friendlier regulations.
