Fed Lifts Reputation Risk for Crypto Debanking

Fed's New Proposal Targeting BTC and the Crypto Sector

The US Federal Reserve (Fed) has published a proposal to codify a rule removing “reputation risk” from banking supervisions. This step targets the practice seen as the cause of the debanking wave in the crypto sector in recent years. The Fed instructed supervisors from June 2023 not to force banks to close customer accounts due to reputation risk; decisions will be based solely on financial risk management. A 60-day comment period has been set for the proposal announced on Monday. This change, as we emphasized on our BTC detailed analysis pages, will strengthen banking access for Bitcoin firms.

The End of Operation Chokepoint 2.0 and BTC Firms

Supervisory Vice Chair Michelle Bowman condemned supervisors pressuring debanking due to political views, religious beliefs, or legal but unpopular sectors, and emphasized that it is discriminatory. Wyoming Senator Cynthia Lummis praised the move, stating that the Fed should not play judge for digital asset companies and that Operation Chokepoint 2.0 is over. Galaxy Digital Research Head Alex Thorn also said, “The Chokepoint 2.0 rollback continues.” The current administration is taking steps aimed at reviewing crypto firms' debanking complaints. This is a development that will also support the BTC futures market.

Source: Cynthia Lummis

Positive Impacts on the BTC Market

This proposal can accelerate BTC adoption by bringing stability to the crypto ecosystem. Banks will now focus only on financial risks, which increases confidence in areas like BTC futures. Market participants see the reduction in debanking pressure as a catalyst for a BTC rally.