In a surprising shift, the Federal Reserve has eased its scrutiny of reputational risks, a tool that critics argue has been wielded to “assassinate” crypto firms in the United States. This policy change comes as a relief to many in the cryptocurrency sector, which has been grappling with the fallout from the closure of several crypto-friendly banks in 2023. Notably, this move marks a significant departure from the more stringent oversight that characterized the era of Operation Chokepoint 2.0.
The Federal Reserve’s New Stance
The Federal Reserve’s decision to recalibrate its approach to reputational risk management appears to signal a more lenient regulatory environment for crypto entities. According to insiders, this pivot is aimed at fostering innovation and restoring confidence in the sector, which has been battered by a series of bank closures over the past two years. The central bank’s change in attitude could be a game-changer for tech and crypto companies that have been struggling to maintain banking relationships. This shift aligns with broader calls for a global response to crypto regulation, as highlighted by the FCA’s recent push for international cooperation.
One industry analyst noted, “The Fed’s previous stance made it exceptionally difficult for crypto firms to operate. It was as if they were being slowly suffocated.” This sentiment echoes the frustrations of many who felt that the reputational risk framework was being employed disproportionately against the crypto industry.
A Look Back at Operation Chokepoint 2.0
Operation Chokepoint 2.0 was widely perceived as a concerted effort by regulatory bodies to curtail the growth of the cryptocurrency sector. More than 30 tech and crypto companies found themselves unceremoniously cut off from banking services following the implosion of major crypto-friendly banks in 2023. This abrupt withdrawal of financial support left many firms scrambling to find alternative banking solutions, stifling innovation and driving some companies to relocate to more crypto-friendly jurisdictions abroad.
The crackdown drew sharp criticism from industry stakeholders and some policymakers who argued that it was stifling competitiveness and innovation. “We were being painted with the same brush as bad actors without any evidence of wrongdoing,” lamented a CEO of a mid-sized blockchain company. This sentiment was echoed by many who believed the regulatory approach was too broad and indiscriminate. Meanwhile, in other parts of the country, local governments are taking their own measures, such as Washington City’s ban on Bitcoin ATMs amid concerns over crypto scams.
Implications for the Future
The Federal Reserve’s softer stance on reputational risks could usher in a new era of growth and innovation for the crypto sector in the U.S., but it’s not without its challenges. While the regulatory landscape may be shifting, questions remain about how this change will be implemented and what it means for future oversight.
Critics caution that the devil is in the details. “It’s one thing to announce a change in policy, but how it’s executed will determine the real impact,” said a legal expert specializing in fintech regulations. With the ever-evolving nature of the crypto market, maintaining a balance between oversight and innovation is a delicate task that regulators must navigate carefully.
As the Fed rethinks its approach, there’s cautious optimism that this could lead to a more balanced regulatory environment—one that encourages innovation while safeguarding against potential abuses. However, industry leaders remain vigilant, wary of any potential backsliding.
The Road Ahead
Looking forward, the crypto industry is poised for a potential resurgence in the U.S., but it’s a path that must be tread carefully. While the Fed’s new stance is a positive development, the sector’s future hinges on continued dialogue between regulators and industry players. Collaborative efforts will be crucial in shaping a regulatory framework that supports growth while ensuring consumer protection and financial stability.
As the dust settles from the tumult of the past few years, the crypto world is watching closely. Will this regulatory thaw lead to a new wave of investment and innovation, or are there more hurdles on the horizon? Only time will tell, but for now, the industry can breathe a tentative sigh of relief, hopeful for what lies ahead.
Source
This article is based on: Fed cuts ‘reputational risk’ scrutiny used to ‘assassinate’ crypto firms
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
