The FDIC initiates a strategic change by abandoning the use of “reputational risk” as a supervisory criterion, paving the way for fairer treatment of crypto companies.
This decision is part of a political momentum led by Republicans, including the FIRM Act, which aims to ban this practice in federal banking supervision.
The end of this regulatory lever, often used to discreetly exclude crypto companies, is seen as a victory against the informal strategy called “Chokepoint 2.0”.
Towards the end of a controversial lever in banking supervision
Under increasing pressure from Republican lawmakers and crypto industry players, the Federal Deposit Insurance Corporation (FDIC) announces a historic change in direction: the progressive abandonment of the concept of “reputational risk” in its supervision mechanisms. This initiative comes in a tense context where several companies linked to digital assets denounce their systematic exclusion from essential banking services.
In a letter addressed on Monday to Representative Dan Meuser, interim Chairman Travis Hill of the FDIC stated that the agency is actively working on a new regulatory framework for digital assets. He further specified that regulators should no longer use reputational risk as a basis for criticizing or sanctioning banking activities.
The reputation of a bank is important, but most of the threats it faces are already manifested through traditional channels such as credit risk or market risk.
A strong signal to the crypto industry
This repositioning marks a symbolic victory for defenders of the crypto ecosystem. For years, many companies in the sector have denounced their exclusion by banking institutions, despite solid financial records and increasing regulatory compliance. The removal of “reputational risk” as an evaluation criterion paves the way for fairer access to financial services.
Matthew Sigel, Head of Digital Asset Research at VanEck, has welcomed this announcement as a “significant step forward against Chokepoint 2.0”. This term, popularized by investor Nic Carter, refers to an unofficial strategy by US regulators to marginalize certain industries by restricting their access to the banking system under the guise of moral or political considerations.
Affirmed political momentum
The movement initiated by the FDIC is part of a broader wave started in Congress. Republican President of the Senate Banking Committee, Tim Scott, recently proposed the FIRM Act, a bill aimed at banning the use of reputational risk in all federal banking supervision. The bill passed its first stage with the support of the Republican majority, although no Democratic senator approved it.
The Office of the Comptroller of the Currency (OCC) has also decided, last week, to remove any reference to reputational risk from its manuals and guidelines. While the agency states that this does not alter its general risk management expectations, the coordination of these announcements demonstrates a federal willingness to fundamentally reform the supervision tools.
Debanking, crypto, and the shadow of Trump
This questioning of reputational risk also has a strong political echo in the presidential campaign. Donald Trump, now president, has promised to put an end to all forms of banking discrimination against sectors deemed sensitive. He explicitly referred to “Operation Choke Point 2.0”, criticizing an approach he considers politically motivated.
For players in the digital finance industry, this development could usher in a new era: one characterized by normalized access to credit and banking services based on economic fundamentals rather than subjective or ideological judgments.
