Crypto banking rules reshape Fed proposal safeguards

In a move closely watched by digital asset markets, the U.S. Federal Reserve has unveiled a proposal on crypto banking that could reshape how lenders work with the industry.

Federal Reserve targets end to debanking practices

The Federal Reserve has opened a 60-day public comment period on a new rule that would stop banks from citing “reputation risk” as a reason to deny services to crypto firms. This step, announced in early 2025, is designed to expand banking access for crypto companies that have long struggled to secure stable financial partners.

The proposal seeks to remove one of the biggest barriers between crypto companies and traditional banking. For years, some institutions have either closed accounts or refused onboarding due to perceived image concerns, even when financial risks were limited or well understood. However, under the draft rule, banks would need to justify decisions using clear, measurable financial risk metrics.

The central bank emphasized in its statement that supervision should not be driven by vague concerns about public perception. Instead, it stressed that banks must rely on sound risk management, capital requirements, and compliance assessments. Moreover, the measure is meant to ensure that law-abiding digital asset firms receive the same fair access to services as other legal industries.

Public feedback and the end of “Operation Chokepoint 2.0”

In its official communication, the Federal Reserve confirmed that it is inviting comments from banks, market participants, policymakers, and the general public before finalizing the rule. The focus is on clarifying that supervisory guidance cannot be used informally to discourage relationships with lawful but politically sensitive sectors.

This move is widely seen across the industry as an effort to end what many have labeled Operation Chokepoint 2.0, a perceived pattern in which regulators informally pressured banks to sever ties with digital asset firms. That said, the new framework would still require strict oversight of money laundering, fraud prevention, and consumer protection.

The Fed had already signaled a shift last year. Supervisors were instructed not to push banks into closing accounts based solely on reputational concerns. Instead, lenders were told to evaluate clients through traditional credit analysis, liquidity impact, and compliance metrics. Moreover, this earlier guidance laid the groundwork for the current rulemaking process.

Political and industry reaction to the proposal

U.S. Senator Cynthia Lummis, a prominent voice on digital asset policy, welcomed the policy change and described it as long overdue. She argued that regulators should not unfairly restrict digital asset companies from accessing banking services, provided they follow existing laws and risk controls.

Her comments underline a growing bipartisan recognition that clarity in banking and crypto rules is essential for innovation and investor protection. However, some policymakers are likely to push for strong safeguards, seeking to ensure that any expansion of banking relationships does not weaken anti-money laundering regimes.

Industry advocates say formalizing these principles could reduce the uncertainty that has discouraged several regional and community banks from working with digital asset firms. Moreover, a clear rule may help level the playing field between large global institutions and smaller lenders that have been hesitant to engage with the sector.

Why the Fed is shifting its stance now

The Fed’s policy shift comes as crypto becomes increasingly entwined with the global financial system. In the United States, the approval of spot Bitcoin ETFs has allowed major asset managers such as BlackRock, Fidelity, and Franklin Templeton to gain regulated exposure to digital assets.

These firms depend heavily on reliable banking infrastructure for custody, settlements, and fund operations. However, uncertainty around reputation risk has historically made some banks wary of servicing the broader ecosystem that underpins ETF products, exchanges, and custodians.

By removing the reputation risk factor from supervision, the Federal Reserve aims to provide clearer guardrails. Banks that meet regulatory standards would have greater confidence in establishing or maintaining relationships with digital asset clients. Moreover, this clarity could support institutional crypto adoption growth as more traditional players explore tokenization and on-chain finance.

Impact on crypto companies and banks

For many crypto businesses, maintaining stable bank accounts has been a persistent operational challenge. Some reported sudden account closures or last-minute onboarding rejections despite having robust compliance frameworks. In several cases, institutions cited broad risk appetite shifts rather than specific violations.

In parallel, a growing number of global banks have moved in the opposite direction, actively building digital asset capabilities. BNY Mellon now offers crypto custody services for institutional clients, while Standard Chartered has launched digital asset custody through its Zodia Custody platform. These initiatives signal a strategic bet that tokenized assets and blockchain-based infrastructure will be long-term features of finance.

In the United States, JPMorgan and Goldman Sachs have expanded their blockchain and crypto-related offerings, including settlement networks and structured products. Moreover, banks such as HSBC and Citi are developing digital asset infrastructure, further blurring the line between traditional markets and on-chain activity.

Potential outcomes of the new rule

If the proposed rule is approved after the 60-day comment window, crypto companies could find it easier to open and maintain a crypto banking account with compliant institutions. Clearer standards may also reduce the legal and regulatory uncertainty that has discouraged banks from entering this space.

Supporters argue that more predictable access to banking will improve business operations, payroll management, fiat on-ramps, and treasury functions for digital asset firms. However, they also expect supervisors to continue enforcing strict compliance with sanctions rules, know-your-customer checks, and anti-money laundering obligations.

For banks, the rule could open new fee and deposit opportunities, while also demanding more sophisticated risk models tailored to digital assets. Moreover, the change may accelerate development of crypto banking solutions that integrate on-chain data with traditional risk and compliance systems.

What this means for the future of crypto banking

The crypto banking debate has often centered on whether digital asset firms should be treated differently from other high-risk industries. The Fed’s proposal suggests that as long as risks are quantifiable and managed, blanket exclusions based on reputation alone are no longer acceptable.

Over time, a more standardized approach to supervision could help normalize relationships between banks and digital asset companies. That said, the final impact will depend on how the rule is implemented, how supervisors interpret it in practice, and how aggressively banks choose to embrace the sector.

In summary, the Federal Reserve initiative marks a significant step toward formalizing how traditional finance interacts with digital assets, potentially reshaping access to banking services and supporting more sustainable industry growth.