Fed Proposes End to Reputation Risk Rule Amid Crypto Debanking Concerns

The US Federal Reserve is taking steps to address criticism of its 'reputation risk' rule, which has been linked to cases of crypto debanking. According to sources, the Fed has directed supervisors to stop pressuring banks to close client accounts over reputation risk, instead focusing on financial risk management.

Michelle Bowman, Vice Chair for Supervision at the Federal Reserve, highlighted the issue of 'deb integration' where supervisors use concerns about reputation risk to pressure banks to cut ties with certain customers. This has been seen as a form of discrimination against individuals or businesses due to their political views, religious beliefs, or participation in lawful but disfavored activities.

The move is seen as a significant step towards eliminating 'Operation Chokepoint 2.0', a term used by the crypto industry to describe what they perceived as a coordinated effort to restrict access to traditional banking services for crypto companies.