Fed Scraps ’Reputational Risk’ Hurdle—Crypto Banks Just Got Their Green Light

The Federal Reserve just bulldozed a major roadblock for crypto-friendly banks—and Wall Street didn't see it coming.

No more 'reputational risk' handcuffs

Gone is the vague 2020 guideline that let regulators reject banking applications based on perceived 'reputational risk.' Translation: banks can finally service crypto clients without fearing arbitrary shutdowns.

The compliance playbook rewrites itself

Expect a flood of BSA/AML filings as institutions rush to onboard digital asset firms. The Fed's move effectively forces the OCC and FDIC to align—or explain why they won't.

Cynical take
: Nothing motivates regulators like seeing competitors eat their lunch. When crypto startups bypass traditional banking anyway, suddenly 'risk management' gets flexible.

This isn't just policy—it's surrender. The Fed just admitted decentralized finance won't be stopped by paperwork. Game on.

Why This Decision Matters Now

The concept of reputational risk was never clearly defined. It gave regulators broad discretion to flag a bank for doing business with companies that were legal but unpopular in some circles. Crypto firms have long felt the pressure from this. Some have been dropped by their banks without explanation. Others never got access in the first place.

FED JUST OFFICIALLY REMOVED
"REPUTATIONAL RISK" FOR BITCOIN
AND CRYPTO BANKING.

BULLISH FOR CRYPTOpic.twitter.com/fuvl7RnbKU

— Ash Crypto (@Ashcryptoreal) June 23, 2025

The change from the Fed means that banks are no longer expected to consider how public perception might affect their business relationships. They are still required to assess financial, operational, and legal risk, but the question of what might look bad is no longer part of the equation.

This doesn’t mean banks will rush to onboard crypto clients tomorrow, but it does clear up a gray area that has held things back. Now, banks can focus on what actually matters—whether a client is safe, compliant, and financially sound.

A Break for Crypto’s Banking Problem

For crypto firms, this update removes a major source of friction. Many companies have been stuck relying on foreign institutions or risky payment workarounds just to handle basic banking. Even large, well-established platforms struggled to maintain consistent relationships with U.S. banks. And smaller startups? They barely stood a chance.

With the reputational hurdle gone, banks are in a better position to evaluate crypto clients based on real risk, not speculation or fear of bad press. That opens the door, at least in theory, for more stable and long-term partnerships.

Of course, crypto still carries real risk. Banks will continue to monitor for fraud, compliance failures, and volatility. But those are standard parts of any risk assessment. What changes now is that the decision to work with a crypto firm is no longer shadowed by what regulators or the media might think about it.

Setting the Tone Across Agencies

The Fed’s MOVE is part of a broader effort to bring consistency across U.S. financial oversight. Earlier this year, both the FDIC and the OCC made the same adjustment. With all three major regulators aligned, the message is clearer. Banks will not be punished for working with legal businesses simply because they are controversial.

This creates a more predictable environment for both banks and the crypto industry. It also removes a LAYER of discretion that some viewed as inconsistent or even political. Going forward, if a firm meets legal and compliance requirements, it should be able to access essential financial services without facing invisible roadblocks.

A More Practical Approach to Risk

The decision to drop reputational risk does not mean regulators are taking their foot off the gas. It means they are narrowing their focus to real, measurable threats to safety and stability. That shift could help modernize oversight for industries that are rapidly evolving.

Crypto is still far from fully integrated into the traditional financial system, but this is one less obstacle standing in the way. And for companies that have spent years fighting for basic banking access, that is a meaningful step forward.

Key Takeaways

• The Federal Reserve has removed reputational risk from its supervisory guidelines, aligning with the FDIC and OCC.
• Banks are no longer required to consider public image when deciding whether to work with crypto firms.
• This change makes it easier for legal and compliant crypto companies to access traditional banking services in the U.S.
• The move could lead to more stable partnerships between banks and crypto firms based on real risk, not fear of controversy.
• With all three major regulators aligned, the decision signals a more consistent and objective approach to financial oversight.