Federal Reserve Removes “Reputational Risk” from Bank Examinations, Clearing Path for Banks to Serve Crypto Firms
June 23, 2025 — In a significant regulatory development, the Federal Reserve Board announced on June 23 that it will eliminate the use of “reputational risk” as a factor in its bank supervision program. This move aligns the Fed with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), both of which have already removed reputational risk from their regulatory frameworks earlier this year.
What This Change Means for Banks and Crypto Firms
Previously, reputational risk—a subjective and often vague criterion—allowed bank examiners to impose restrictions or deny services to banks wishing to work with cryptocurrency companies. This barrier made it difficult for banks to offer even basic crypto-related services such as buying and selling Bitcoin (BTC). By stripping this consideration from their supervision manuals, regulators are now focusing strictly on measurable financial exposures related to legal, credit, operational, and liquidity risks.
Fed examiners will undergo new training to apply this updated guidance consistently across all institutions supervised by the Board. The Federal Reserve will also coordinate with the FDIC and OCC to ensure uniform practices across the federal regulatory spectrum. Despite removing reputational risk from their oversight toolkit, regulators emphasized that banks must still maintain comprehensive risk management frameworks to assure safety and soundness.
Federal Reserve Signals Support for Regulated Crypto Innovation
Federal Reserve Chair Jerome Powell foreshadowed this policy shift during a speech in April at the Economic Club of Chicago. Powell called on Congress to establish a clear regulatory framework for stablecoins and stated explicitly that the Fed does not intend to hinder lawful banking relationships with crypto firms.
“Some guidance may be relaxed to accommodate responsible innovation,” Powell remarked, acknowledging the conservative posture regulators took following notable crypto market failures in 2022. He also highlighted that crypto custody services are already operating within Fed-supervised banks, and pledged to preserve financial system safety while permitting institutions to engage meaningfully with digital assets.
In line with these remarks, the passage of the GENIUS Act by the Senate on June 17 marked a pivotal step towards clearer federal regulation in the crypto space, pending further consideration by the House of Representatives.
Impact Across the Banking and Crypto Industries
Together, the Fed, FDIC, and OCC oversee every federally insured bank in the United States. Their coordinated decision to remove reputational risk as a regulatory consideration removes a key subjective hurdle and signals a more crypto-friendly regulatory environment. This change could facilitate broader access for cryptocurrency firms to traditional banking services, which are essential for growth, operational efficiency, and integration with the wider financial system.
Industry experts have welcomed the move as a necessary evolution of banking supervision policy that balances safety concerns with the need to support innovation. Banks interested in serving crypto clients can now proceed with greater regulatory clarity and reduced ambiguity regarding examiner assessments.
Looking Forward
The Federal Reserve’s latest directive crowns a three-month interagency effort to refine bank supervision policies concerning crypto assets. With this update, only concrete operational, financial, and legal criteria will underpin examiner actions, replacing the previously criticized reputational risk standard.
As the legislation around crypto regulation advances and regulators align on supervisory standards, the evolving regulatory landscape is likely to foster more robust partnerships between traditional financial institutions and crypto businesses, paving the way for new products and services in the digital asset economy.
Author: Gino Matos, CryptoSlate Reporter
Editor: Assad Jafri, CryptoSlate
For further information, follow Gino Matos on Twitter [@pelimatos]