Key Takeaways
- According to a notice released Thursday, the FDIC’s board of directors has placed on its agenda a draft rule that would restrict regulators from citing “reputation risk” when assessing banks
- Acting chair Travis Hill has repeatedly argued that the label of reputation risk has been used as a pretext to block certain banking services
The Federal Deposit Insurance Corporation(FDIC) will soon open discussion on proposed rules that could reshape how regulators treat banks working with crypto firms.
According to a notice released Thursday, the FDIC’s board of directors has placed on its agenda a draft rule that would restrict regulators from citing “reputation risk” when assessing banks. Although the agenda item makes no direct reference to crypto, the issue has long hovered over the industry. Acting chair Travis Hill has repeatedly argued that the label of reputation risk has been used as a pretext to block certain banking services, including transfers between customers and digital asset exchanges.
The conversation builds on political attention from earlier this year. In August, US President Donald Trump signed an executive order on “guaranteeing free banking,” warning that regulators could exploit vague notions of reputation risk to justify debanking. The order directed regulators to review all banks they supervise for any current or past practices that would effectively bar users based on political as well as religious beliefs, and levy fines or other disciplinary measures as needed.
For years before that order, companies in the sector complained that they had been quietly cut off from U.S. banks. What some described as an orchestrated push became clearer in December, when documents obtained through a Freedom of Information Act request showed FDIC officials had advised banks to halt all crypto-related activities in 2022.
