Fed Drops ’Reputational Risk’ Hurdle – Is This Crypto’s Big Banking Breakthrough?

The Federal Reserve just ripped up its old playbook—banks no longer need to treat crypto like a regulatory scarlet letter. Could 2025 finally be the year Wall Street stops pretending blockchain doesn’t exist?

The backpedal heard ‘round the crypto sphere

After years of warning lenders about digital asset ‘reputational risks,’ the Fed’s sudden U-turn smells like desperation. With Bitcoin eating traditional finance’s lunch, even central bankers can’t ignore the math.

Bankers’ dilemma: innovate or die

JPMorgan’s blockchain team must be popping champagne—while regional banks scramble to explain why they’ve been sitting on their hands. Nothing motivates finance like FOMO and the scent of fresh fees.

The irony? This ‘bold new guidance’ arrives five years late and three ETFs short of crypto’s mainstream moment. But hey—better late than never for an industry that still thinks ACH transfers are cutting-edge tech.

Will banks back crypto now?

Critics have long argued that the vague nature of “reputational risk” leaves it open to political misuse. They referred to widespread crypto debanking that occurred during the Joe Biden administration as a prime example.

In fact, Caitlin Long, Founder of Custodia Bank, stated that the latest MOVE was necessary but not enough to end debanking. 

“Necessary but not sufficient to end #debanking — but definitely worth celebrating as an intermediate step!”

However, others like Consumers’ Research’s Will Hild welcomed the move as a ‘huge win’ against unjustified debanking. 

“This is a huge win — this was one of the key tools big banks used to try to justify their debanking of conservatives.”

For the unfamiliar, during the Biden era, banks reportedly blocked most crypto users and legal firms from accessing the financial system—a move commonly referred to as “Operation ChokePoint.”

However, under the TRUMP administration, several guidances that were perceived to be anti-crypto have since been rolled back. 

In fact, some TradFi players, who were previously waiting for regulatory clarity, like JPMorgan and Bank of America, have disclosed plans to enter the stablecoins sector. 

In addition, the U.S. Housing Chief, Bill Pulte, recently stated that they were considering using crypto holdings for mortgage qualifications.  

“We will study the usage of cryptocurrency holdings as it relates to qualifying for mortgages.”

Earlier in June, JPMorgan also unveiled plans to use Bitcoin ETFs as collateral, further cementing increasing support for crypto by TradFi players.