The Federal Reserve has announced a 60-day public comment period on a proposal that effectively closes the main tool for pressuring banks working with the crypto industry. If the rule takes effect, banks will no longer be able to deny crypto clients by citing reputational concerns.
What Exactly the Fed Proposes
The current supervisory practice allowed regulators to point to ‘reputational risk’ when banks worked with crypto companies—a vague criterion that in practice became a tool of pressure without the need to prove specific financial harm.
The new proposal changes the logic: banks must assess clients solely based on measurable financial risks. The reputational factor is removed from supervisory tools. This means that a bank refusing to serve a crypto company will have to justify the decision with specific indicators—not just a general negative perception of the industry.
Last summer, the Fed already sent a recommendation to supervisory agencies not to pressure banks to close accounts for reputational reasons. The current proposal moves this position from a recommendation to a regulatory format.
‘Operation Chokepoint 2.0’ and Its Consequences
Within the crypto community, what is happening is commonly referred to as the finale of ‘Operation Chokepoint 2.0’—an informal name for the policy in which regulatory pressure effectively forced banks to deny services to companies in certain sectors, including crypto.
The consequences for the industry were significant. Crypto exchanges, market makers, custodians, and startups faced account closures without explanation or refusals to open new ones. Some companies were forced to register in other jurisdictions just to access banking infrastructure.
The investment appeal of the U.S. market declined—not because of direct regulatory bans, but because of the operational impossibility of working normally.
Senator Cynthia Lummis, one of the most consistent supporters of the crypto industry in Congress, supported the Fed’s initiative, noting that regulators should not restrict digital assets’ access to banking services on non-financial grounds.
Why the Change Is Happening Now
Context matters. The launch of spot Bitcoin ETFs in the U.S. attracted the largest institutional managers—BlackRock, Fidelity, Franklin Templeton—to the industry. All of them critically depend on banking infrastructure: custodial services, settlement systems, and operational support for funds.
When institutions of this scale enter the crypto market through regulated products, banking isolation of the industry becomes a structural contradiction. It is impossible to approve a Bitcoin ETF from BlackRock while maintaining supervisory mechanisms that de facto block banking services for crypto companies.
Changes in leadership at regulatory agencies have added political opportunity for a course correction. The new administration is consistently signaling its intention to create a more favorable environment for digital assets—the Fed’s proposal fits this logic.
Banks Have Already Started Moving Forward
The change in regulatory position accelerates a process that was already partially underway. BNY Mellon launched custodial services for institutional clients in crypto assets. Standard Chartered opened a digital custody division through the Zodia Custody platform. JPMorgan and Goldman Sachs are expanding blockchain and crypto infrastructure.
Outside the U.S., HSBC and Citi are working on infrastructure solutions for digital assets. Major banks were moving toward crypto cautiously and gradually—largely because regulatory uncertainty created reputational and supervisory risks. Removing the ‘reputational’ criterion eliminates one of the main restraining factors.
What Will Change for Crypto Companies
The practical effect of adopting the rule will vary for different categories of participants. Large, regulated entities with transparent reporting and institutional clients will benefit the most—banks were already working with them, albeit with restrictions. For them, the change means lower operational costs and less legal uncertainty.
The situation is more difficult for smaller and less regulated players. The repeal of the reputational criterion does not mean that banks are required to serve everyone without exception—financial risks as grounds for refusal are not going anywhere. Companies with opaque structures, high cash turnover, or problematic histories may still face refusals.
The 60-day comment period gives the industry an opportunity to formulate specific requests for the final rule wording. How clearly the financial risk criteria are defined will determine how broad the real effect of the changes will be.
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