- The Federal Reserve has proposed a rule to remove “reputation risk” from bank supervision.
- Lawmakers and industry cited debanking tied to subjective regulatory pressure.
- Public comments will shape a final rule that could permanently change U.S. banking oversight.
The Federal Reserve Board has requested public comments on February 23, 2026, to remove “reputation risk” from bank supervision permanently. Vice Chair Michelle Bowman leads this effort to refocus oversight strictly on core financial risks.
This proposal addresses the debanking of lawful businesses, including digital asset firms, by prohibiting examiners from pressuring banks over subjective reputation concerns. The move builds on the June 2025 decision and aims to end perceived regulatory overreach like Operation Chokepoint 2.0.
Why Removing ‘Reputation Risk’ Matters
Vice Chair Michelle W. Bowman has emphasized that reputation risk is a vague, subjective standard that distracts supervision from core financial risks like credit, liquidity, and market exposure. The Federal Reserve’s proposal codifies the removal of reputation risk from supervision, building on its June 2025 decision to eliminate it from bank examination programs.
“We have heard troubling cases of debanking—where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their political views, religious beliefs, or involvement in disfavored but lawful businesses,” Bowman stated.
The proposal removes this tool to prevent biased supervision, focusing on credit, liquidity, and market risks while ensuring fair, risk-based oversight by the Feds.
The Hidden Debanking System Behind Chokepoint 2.0
Critics say that ‘reputation risk’ has been misused as Operation Chokepoint 2.0, a modern revival of the Obama-era program pressuring banks to drop lawful but targeted industries. According to the House Financial Services Committee’s Nov. 30, 2025, report, Biden-era regulators, led by the Fed, misused supervisory tools to debank at least 30 digital asset firms and individuals.
Key cases that show how crypto debanking hit major players include Anchorage Digital when it lost its corporate account in June 2023, forcing a 20% workforce cut; Marathon Digital Holdings had $70M frozen just six days after opening; and banks closed personal accounts of Uniswap CEO Hayden Adams, Ripple CEO Brad Garlinghouse, and Gemini co-founder Tyler Winklevoss.
“It’s not the Fed’s role to play both judge and jury for banking digital asset companies… put Operation Chokepoint 2.0 to rest.” Senator Lummis stated.
What This Means for Crypto and U.S. Banking
The Federal Reserve’s proposal strengthens U.S. leadership in digital assets by ending perceived regulatory weaponization. Along with the GENIUS Act, which set the first federal framework for payment stablecoins with 1:1 reserves, monthly disclosures, and regulated issuers, it enables clearer stablecoin issuance and smoother integration.
This proposal will strengthen crypto banking ties, boosting liquidity, innovation, and institutional participation while ensuring safety. By codifying the June 2025 removal of reputation risk, banks meeting capital, liquidity, and compliance standards can pursue lawful but controversial activities without supervisory pushback, thus reducing chilling effects.
Related: OCC Debanking Review Exposes How Big US Banks Quietly Squeezed Crypto
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Source: https://coinedition.com/fed-proposes-to-codify-removal-of-reputation-risk-from-bank-rules/
