The U.S. Federal Reserve has permanently eliminated the consideration of ‘reputational risk’ from bank supervision. This move aims to reduce informal supervisory pressure on banks and improve oversight through transparent and clear regulations. Experts and industry representatives support the change, seeing it as a pathway for easier and legal banking access to the cryptocurrency sector. Previously, reputational risk referred to the potential harm to a bank’s reputation during supervision, which sometimes discouraged banks from engaging with emerging financial areas like cryptocurrency services. As cryptocurrency and blockchain technology expand, lawmakers and industry leaders are urging Congress to establish clear, actionable regulations for crypto banking to ensure legal protection and sector growth. The Federal Reserve’s policy shift seeks to create a more orderly and progressive banking system, granting banks greater freedom in business decisions with less informal pressure. However, other supervisory standards and safeguards will remain to maintain financial stability. This development is part of broader efforts to enhance transparency and innovation in the U.S. financial system, including integrating cryptocurrency into the regulated financial framework. The future will reveal how Congress legislates appropriately for cryptocurrency within this new environment and how the banking sector adapts to the change.
Source: decrypt
