The Senate Banking Committee announced on March 25 that the Federal Deposit Insurance Corporation (FDIC) will eliminate reputational risk as a component of bank supervision.
White House “Crypto Czar” David Sacks said the FDIC’s decision was a significant correction, and called it “a big win for crypto.
He added:
“In practice, this vague and subjective criteria was used to justify the debanking of lawful crypto businesses through Operation Chokepoint 2.0. Banking criteria should be objective and quantitative, not based on the potential for untrue stories.”
Operation Chokepoint 2.0 was an allegedly concerted effort by regulators under former President Joe Biden’s administration to prevent banks from engaging with the crypto industry. This included the denial of banking services for crypto-related businesses.
Sacks also credited Senator Tim Scott for leading the legislative effort through the FIRM Act, which aims to codify the removal of reputational risk standards across all federal financial regulators.
The Act mandates that institutions cannot be denied access to financial services based on the subjective perception of risk unconnected to a violation of law or regulation.
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