Federal Reserve Scraps Rule Used to Debank Crypto Firms

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Federal Reserve Scraps Controversial Risk Rule Used to Debank Crypto Firms

Written by Aaron S.,

Editor-In-Chief

Last Updated: June 24, 2025

Key Takeaways

The Federal Reserve will no longer use "reputational risk" as a basis for supervising banks, instead focusing on measurable financial risks;
Banks can still factor in reputational risk internally, but examiners will now follow more defined oversight guidelines;
Crypto advocates and banking groups called it a step toward fairer and more consistent regulatory practices.

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The Federal Reserve has announced it will stop using "reputational risk" as a reason for supervising banks.

Reputational risk had been defined by the Federal Reserve as the chance that negative public attention could damage a bank’s customer base, lead to lawsuits, or reduce its earnings.

The Federal Reserve stated in a press release published on June 23 that it is reviewing its rules and will replace any mention of "reputational risk" with clearer explanations focused on actual financial risks, such as liquidity or credit issues.

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Bank examiners will also receive training to follow this updated approach, and the Federal Reserve plans to work with other federal regulators to ensure this change is applied the same way across the board.

However, banks are still expected to manage risks properly and follow all regulations. The Federal Reserve also said this change does not stop banks from using reputational risk in their own internal decision-making if they choose to do so.

Rob Nichols, head of the American Bankers Association, stated that the decision will help make oversight clearer and more consistent. He added that banks should be able to make their own business choices based on financial risk and market conditions.

Additionally, US Senator Cynthia Lummis said in a post on X that past policies had been used to shut down crypto businesses unfairly. She called the Federal Reserve’s decision a "win" for the industry but said more progress is still needed.

On June 12, the US Securities and Exchange Commission (SEC) withdrew 14 pending rule proposals, including two related to how cryptocurrencies are stored and traded. What do those two proposals cover? Read the full story.