In a significant policy reversal, the U.S. Federal Reserve has removed the long-standing “reputational risk” restriction from its Bank Supervision Manual. This change effectively clears the way for crypto banks and digital asset service providers to access the Federal Reserve’s payment and financial infrastructure—something previously out of reach due to regulatory hesitation.
The move is widely seen as a positive development for the broader crypto industry, which has long been excluded from traditional banking rails over perceived reputational concerns.
What the Policy Change Means
The decision eliminates language that discouraged reserve banks from engaging with institutions tied to “high-risk” or “controversial” industries. This policy had been broadly applied to cryptocurrency firms, even those with strong compliance practices and regulatory licenses.
The updated guidance, released on June 23 by the Federal Reserve Board, now focuses strictly on risk management, legal eligibility, and operational soundness, removing subjective barriers based on public perception.
“Reserve Banks should not rely on ‘reputational risk’ as a standalone criterion… and should instead evaluate applications based on the law and safety/soundness principles,” the Fed stated in its official press release.
This change aligns with growing pressure from lawmakers and industry leaders to modernize how the Fed approaches banking access for fintech and crypto-native companies.
Why This Matters for Crypto Banks
Until now, crypto-friendly banks like Custodia Bank and others have struggled to gain access to master accounts and direct Fed services—often citing the reputational risk clause as a blocking factor. Critics argued that the vague language created a discretionary veto power that lacked transparency and hindered innovation.
The new policy does not guarantee approval for any institution, but it does eliminate one of the biggest unofficial roadblocks that crypto institutions have faced when attempting to integrate with the U.S. financial system.
For companies that comply with federal and state regulations, the shift suggests a more level playing field.
Industry Reaction and Next Steps
While the crypto industry has welcomed the announcement, traditional banking stakeholders have offered a more cautious view. Some warn that opening doors too quickly could introduce new financial stability concerns if oversight frameworks don’t evolve in parallel.
However, industry leaders see the change as long overdue.
Jake Chervinsky, Chief Legal Officer at Variant Fund, noted on social media that the policy shift marks “the clearest sign yet that the Fed is rethinking its posture toward crypto banks.”
The move comes amid broader global regulatory shifts, including the EU’s MiCA rollout and ongoing discussions in the U.S. Congress over stablecoin legislation and digital asset oversight.
Final Thoughts: What the Fed’s Rule Change Signals for Crypto
By removing the reputational risk rule, the Fed has taken a major step toward normalizing crypto banking within the U.S. regulatory framework. This doesn’t mean automatic approvals or deregulation—but it removes a subjective barrier that has held back even compliant actors in the space.
For now, crypto banks still face significant regulatory scrutiny, but at least the rules of the game are starting to become clearer.
