FDIC Drops ‘Reputational Risk’ in Bank Rules, Crypto Advocate Calls It a Win
In what came as a win for the crypto space, the Federal Deposit Insurance Corporation (FDIC) has officially removed “reputational risk” as a factor in bank supervision.
The decision follows the passage of the FIRM Act, championed by Senator Tim Scott, by the U.S. Senate Banking Committee. This act aims to eliminate reputational risk considerations across all federal banking regulators.
FDIC Took After OCC
This policy shift aligns the FDIC with the Office of the Comptroller of the Currency (OCC), which previously made a similar move.
The concept of reputational risk, defined as
“the potential that negative publicity regarding an institution’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions,” has long been controversial.
Critics argue that it has been used subjectively to justify the debanking of lawful businesses, including those in the crypto sector.
The removal of this criterion marks a significant victory for the crypto space.
Venture capitalist and crypto advocate David Sacks hailed the decision as a “big win for crypto.”
He argues that banking supervision should be based on objective and quantitative criteria rather than on speculative concerns about public perception.
Eleanor Terrett, a prominent financial journalist, echoed a similar sentiment, noting that removing reputational risk aligns with efforts to protect legal businesses from unjustified financial exclusion.
SEC Moves Toward Clearer Crypto Regulations
This development comes amid increasing optimism in the crypto industry following the U.S. Securities and Exchange Commission’s (SEC) support for a new regulatory proposal aimed at enhancing oversight of digital asset securities.
CoinRegTech introduced the proposal, which seeks to improve investor protection, market structure, and transaction reporting within the cryptocurrency sector.
CoinRegTech’s recommendations include key regulatory updates, such as requiring trading platforms that handle digital asset securities to implement stronger structural safeguards.
Additionally, the proposal calls for revisions to the Securities Exchange Act to improve transaction transparency and market supervision.
An important aspect of the proposal is the introduction of the Digital Asset Electronic Reporting System (DART), a collaborative effort between the SEC and the Commodity Futures Trading Commission (CFTC).
This system aims to centralize digital asset transaction records, capturing both on-chain and off-chain trades to enhance transparency and accountability.
The SEC has acknowledged the importance of such oversight, particularly given past failures in the crypto market.
Trump Advocates for Stablecoin Regulation and Crypto Leadership
The FDIC’s decision also aligns with a broader regulatory shift that includes growing political support for cryptocurrency.
President Donald Trump recently called for stablecoin regulations and outlined his vision to position the U.S. as a global leader in digital assets.
Speaking at the Digital Assets Summit in New York, Trump urged Congress to pass legislation establishing “simple, common-sense rules” for stablecoins and crypto market structures.
He reaffirmed his administration’s commitment to making the U.S. the “undisputed Bitcoin superpower and crypto capital of the world.”
Trump announced plans for a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile, which he argued would enhance the federal government’s long-term crypto holdings.
He also criticized the Biden administration for selling digital assets at undervalued prices, calling it a financial misstep.
Additionally, Trump vowed to end the regulatory hostility toward cryptocurrencies, particularly targeting Operation Choke Point 2.0, which many in the industry have viewed as an overreach of government authority aimed at restricting financial services for crypto businesses.
His call for clear stablecoin rules comes as the Senate Banking Committee advances the Generating Necessary Information for Uncovering Stablecoins (GENIUS) Act, a bill designed to increase regulatory oversight while fostering financial innovation.
As the FDIC, SEC, and legislative bodies move toward clearer frameworks, crypto businesses and investors may find new opportunities in a more predictable and transparent financial environment.