FDIC Scraps Key Crypto Debanking Rule Ahead of Legislation

In Brief:

FDIC removes “reputational risk” as a supervisory factor, weakening Operation Choke Point 2.0.

Move aligns with Trump’s pro-crypto stance and preempts the pending FIRM Act.

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The U.S. Federal Deposit Insurance Corporation (FDIC) has officially removed "reputational risk" from its bank supervision criteria— a significant policy reversal seen as a major win for the crypto industry.

This vague and often-subjective standard had been used to justify the debanking of lawful crypto companies under the controversial initiative known as Operation Choke Point 2.0. Crypto Czar David Sacks, appointed under President Trump, celebrated the decision, noting that the change reflects a broader pro-crypto regulatory shift in Washington.

"Big win for crypto: The FDIC is following the OCC’s lead in removing 'reputational risk'... used to justify the debanking of lawful crypto businesses," Sacks stated.

Reform Ahead of Legislation

The FDIC's policy change comes as lawmakers continue to push the Financial Institutions Reform Modernization (FIRM) Act. The bill aims to compel regulators to drop the reputational risk assessment and limit arbitrary debanking practices. While the FIRM Act is still in committee and far from becoming law, the FDIC’s early action signals an effort to align with its core provisions.

Under growing scrutiny for its role in suppressing crypto services, the FDIC has taken steps to distance itself from prior enforcement patterns. Acting Chair Travis Hill, who recently took over leadership, has supported transparency by releasing internal documents linked to Operation Choke Point 2.0.

A Broader Policy Shift

This policy reversal follows a larger trend under the Trump administration, which has aggressively prioritized crypto inclusion in the financial system. President Trump previously floated the idea of abolishing the FDIC altogether due to its anti-crypto actions, though the agency has since taken a sharp turn toward regulatory reform.

While some critics of the FIRM Act warn that relaxing rules could open the door to bad actors, the crypto industry largely views the FDIC’s change as overdue. The elimination of reputational risk is expected to restore fair banking access for crypto businesses and reduce compliance ambiguity.

As the regulatory environment evolves, this move may render legislative efforts like the FIRM Act redundant—at least for now.

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