Federal Reserve Moves to End Crypto Debanking, Major Relief for Industry

The post Federal Reserve Moves to End Crypto Debanking, Major Relief for Industry appeared first on Coinpedia Fintech News

Finally, after a long period, the U.S. Federal Reserve has made a major step to improve banking access for the crypto industry. The Federal Reserve has announced a 60-day public comment period on a new proposal that will ensure banks cannot use “reputation risk” as a reason to deny banking services to the crypto industry.

This proposal could remove one of the biggest barriers that have prevented the crypto industry from accessing banking services over the past few years.

Federal Reserve Seeks Public Feedback on New Banking Rule

In its official announcement, the Federal Reserve said it is inviting public comments before making the rule final. The plan focuses on how banks supervise their clients and ensures they base decisions only on financial risk, not reputation.

Such progress is a major step towards putting an end to what is referred to as “Operation Chokepoint 2.0” in the crypto space.

Last year, the Fed told supervisors not to pressure banks to close accounts over reputation concerns. Instead, banks must evaluate customers using measurable financial risks.

The proposal by the Federal Reserve has been welcomed by U.S. Senator Cynthia Lummis. 

“She stated that regulators should not unfairly restrict digital asset companies from accessing banking services.”

Why the Fed Is Changing Policy Now

The Federal Reserve is taking action as crypto increasingly integrates into the global financial system.

The approval of spot Bitcoin ETFs in the U.S. has already enabled major asset managers such as BlackRock, Fidelity, and Franklin Templeton to enter the crypto space. These companies are heavily dependent on banking infrastructure for custody, settlement, and fund management.

By removing “reputation risk” under supervision, the Federal Reserve has eased uncertainty for banks that want to engage with crypto companies.

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Why This Is Important for Crypto Companies

Many crypto companies have, over the years, found it difficult to open and maintain bank accounts. Some banks have refused to work with crypto companies due to financial risks.

Recently, some global banks have already begun to facilitate the adoption of crypto. BNY Mellon has begun to offer crypto custody services to institutional clients, and Standard Chartered has introduced digital asset custody through its Zodia Custody platform.

In the United States, JPMorgan and Goldman Sachs have begun to enhance their blockchain and crypto services. 

On the other hand, banks such as HSBC and Citi are also working on infrastructure for digital assets.

If regulators approve the proposed rule, crypto companies may find it easier to open and maintain bank accounts. This will help improve business operations and increase investor confidence.

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