The Federal Reserve is officially ending “reputational risk” oversight, easing crypto banking restrictions across the US. The Fed Board announced that reputational risk will no longer be a component of examination programs in its supervision of banks on Monday.
“The Board has started the process of reviewing and removing references to reputation and reputational risk from its supervisory materials, including examination manuals, and, where appropriate, replacing those references with more specific discussions of financial risk,” the Fed said in an official statement. “The Board will train examiners to help ensure this change is implemented consistently across Board-supervised banks and will work with the other federal bank regulatory agencies to promote consistent practices, as necessary.”
The Fed previously rated institutions’ reputational risk on the entire spectrum of risks
facing a banking institution, including credit, market, liquidity, operational, and legal risk. The move not only eases banking regulation, but opens the door for lesser crypto regulation and for institutions to operate crypto projects/offerings. Those efforts have also spread to the Securities and Exchange Commission (SEC), which has eased up on its own regulation over crypto firms and the entire industry.
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The lesser restrictions on banking institutions have already been welcomed by these institutions and the crypto community as a whole. Several banks are now investing in crypto ETFs to offer to their customers, which has helped crypto prices stay steady. Furthermore, many crypto fans have welcomed the decision already, calling the Fed decision bullish for crypto.