U.S. crypto lobbying group Blockchain Association has urged the Federal Reserve to formalise the removal of “reputation risk” from bank supervision rules, warning that the concept has been used to restrict access to financial services.
In a comment letter submitted Monday, Blockchain Association executive vice president of legal and government relations Ashok Pinto said the Federal Reserve should turn its June 2025 policy change into a binding rule to prevent future misuse.
Pinto wrote that regulated institutions require “objective, consistent standards,” adding that reputation risk fails to meet that threshold.
Pinto argued that regulatory frameworks must protect the integrity of the financial system without allowing subjective assessments to influence access to banking services.
He wrote that “regulation is meant to uphold the integrity of our financial system, not to pick winners and losers based on the political winds of the day,” while warning that reliance on reputation risk introduces inconsistency into supervisory practices.
Concerns over future policy reversals
Citing past enforcement patterns, Pinto said the use of reputation risk has contributed to debanking actions targeting crypto firms, often described by industry participants as “Operation Chokepoint 2.0.”
He noted that while the Donald Trump administration has rolled back several policies linked to crypto debanking, long-term safeguards remain necessary.
Pinto wrote that future administrations could reintroduce similar measures without clear regulatory limits, stating that “reputation risk is only as neutral as the administration wielding it.”
He added that removing it through formal rulemaking would create a stable standard applicable across political cycles.
Supporting this concern, the Cato Institute reported in January that most debanking cases in the U.S. stemmed from government pressure rather than independent decisions by financial institutions, reinforcing calls for clearer supervisory boundaries.
Push for regulatory alignment
Addressing implementation, Pinto said the Federal Reserve should coordinate its final rule with steps already taken by other banking regulators. He pointed to recent actions by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, which issued a joint rule on April 7 removing reputation risk from their supervisory frameworks.
Pinto wrote that aligning standards across agencies would improve predictability for regulated entities, adding that consistent rules grounded in measurable criteria are necessary to maintain trust in the regulatory process and ensure the safety of the financial system.