The US Federal Reserve is proposing to codify a rule that would remove "reputation risk" as a basis for banking supervision. This move aims to address concerns about "crypto debanking" and discriminatory practices against lawful businesses.
Vice chair for supervision Michelle Bowman stated that supervisors will no longer be permitted to pressure financial institutions to close client accounts based on reputation risk. Decisions must now be solely based on financial risk management. Bowman noted "troubling cases of debanking" driven by political views, religious beliefs, or involvement in disfavored but lawful businesses, emphasizing that such discrimination is unlawful.
The proposal follows earlier directives from June of last year. The Fed has opened a 60-day comment period for the public to submit feedback on the proposed regulation. Supporters, including Senator Lummis, view this as a critical step to fostering the digital asset industry in the United States.