Federal Reserve Invites Public Commentary on Ending Crypto Debanking Practices
The Federal Reserve has opened a 60-day public comment period on a proposed rule that would formally eliminate the practice of debanking cryptocurrency companies.
The Federal Reserve of the United States has announced plans to formalize regulations that would eliminate "reputation risk" as a factor in banking supervision—a practice that critics argue has been responsible for widespread debanking of cryptocurrency-related businesses in recent years.
The central bank first started implementing these changes last June, when it instructed its supervisory staff to cease compelling banks to terminate customer accounts based on reputation risk considerations. Under the revised framework, banking institutions would be permitted to evaluate clients exclusively on the basis of financial risk management criteria.
According to a Monday press release from the Fed, the organization is now soliciting public input on a formal proposal to codify these changes into official policy. The central bank has established a 60-day window for interested parties to submit their comments and feedback.
"We have heard troubling cases of debanking—where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their political views, religious beliefs, or involvement in disfavored but lawful businesses," said vice chair for supervision Michelle Bowman.
"Discrimination by financial institutions on these bases is unlawful and does not have a role in the Federal Reserve's supervisory framework," she added.
Senator Lummis took to X on Monday to express her support for the initiative, emphasizing that the Federal Reserve should not assume the role of "both judge and jury for banking digital asset companies."
"Glad to see this important step to permanently remove 'reputation risk' from Fed policy and put Operation Chokepoint 2.0 to rest so America can become the digital asset capital of the world."
Alex Thorn, who serves as Galaxy Digital's head of firmwide research, similarly expressed approval for the development, commenting on X Monday that the "chokepoint 2.0 rollback continues."
Within cryptocurrency circles, Operation Chokepoint 2.0 refers to what many industry participants perceived as a systematic campaign orchestrated by the Joe Biden-led administration and the banking industry to deny cryptocurrency businesses access to conventional banking services.
The present administration has undertaken a deliberate campaign to eliminate debanking practices across the United States, with President Donald Trump initially considering a draft executive order in August that would have instructed banking regulators to examine debanking allegations from cryptocurrency companies and conservative groups.
The proposed order additionally aimed to mandate that banking regulators eliminate any policies that prompted financial institutions to sever relationships with such clients based on reputation risk considerations.
President Trump is presently engaged in a $5 billion legal dispute with JPMorgan concerning debanking practices, with the president claiming that the financial institution illegally terminated his accounts for political motivations in 2021.
Despite JPMorgan's assertion that the lawsuit lacks legal foundation, reports emerged on Sunday indicating that a former bank executive recently testified in court proceedings that the institution had indeed closed Trump's account in the aftermath of the Jan. 6 Capitol Hill riots.