Fed proposes rule to deal with crypto debanking by scrapping 'reputation risk'

The Federal Reserve has proposed a new rule that would prevent its supervisors from pressuring financial institutions to sever ties with lawful customers based on concerns about "reputation risk." This move comes after instances of "debanking," including JPMorgan Chase cutting off accounts related to Donald Trump and crypto companies. Vice Chair for Supervision Michelle W. Bowman stated that using reputation risk to pressure banks based on political views, religious beliefs, or involvement in lawful businesses like cryptocurrency is unlawful and has no place in the Fed's supervisory framework. This proposal seeks to codify previous actions by the Fed and the Office of the Comptroller of the Currency (OCC) to remove reputational factors from supervision. The Fed's staff memo indicated the rule would prohibit the Board from "encouraging or compelling" banks to deny services for "politically disfavored but lawful business activities." Furthermore, the Fed intends to include "permitted payment stablecoin issuers" in its definition of covered banking organizations once related rulemakings are complete. Comments on the proposal are due within 60 days of February 23rd.

(Source：CoinDesk)