The US Federal Reserve has removed reputational risk limits, paving the way for US banks to expand crypto services and fuel digital asset growth. The announcement, made on June 23, means banks will no longer face penalties for offering cryptocurrency-related services.
The move reflects a broader deregulatory agenda under the Trump administration, which aims to prevent regulators from denying services based on reputational concerns. This change is expected to accelerate the adoption of cryptocurrencies within the mainstream financial sector.
Regulators have been criticized in the past for using reputational risk assessments to discourage banks from serving digital asset companies. The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) have also made similar moves, mirroring the Fed’s shift.
US Senator Cynthia Lummis has welcomed the move, calling it a “win” but warning that more work needs to be done to combat the use of reputational risk as a regulatory tool. Caitlin Long, CEO of Custodia Bank, has also praised the announcement, seeing it as a key step towards ending debanking and Operation Chokepoint 2.0.
The Federal Reserve will train examiners to ensure consistent implementation of this new approach and work with other federal bank regulatory agencies to promote best practices. Banks are still expected to maintain robust risk management practices to ensure safety, soundness, and compliance with laws and regulations.
Source: https://news.bitcoin.com/crypto-scores-major-win-as-fed-scraps-reputation-risk-in-supervision