The FDIC removed its reputational risk criteria in evaluating bank supervision, a key tool that drove crypto debanking efforts. Crypto Czar David Sacks called this a big win for the industry.
The FDIC took this step in response to a proposed legislation that would mandate the same changes. This legislation is far from becoming law, but the FDIC reformed its own guidelines to fall in with Trump’s pro-crypto mandate.
The FDIC Fights Crypto Debanking
The Federal Deposit Insurance Corporation (FDIC) is an important component of US finance regulation. In the past few years, FDIC has been allegedly driving crypto debanking efforts against major businesses and individual investors.
However, the agency is now reversing some of its policies, signaling its wholehearted shift against crypto debanking.
“Big win for crypto: The FDIC is following the USOCC’s lead in removing ‘reputational risk’ as a factor in bank supervision. In practice, this vague and subjective criteria was used to justify the debanking of lawful crypto businesses through Operation Chokepoint 2.0,” claimed David Sacks, Donald Trump’s Crypto Czar.
Essentially, Senator Tim Scott supports the FIRM Act, proposing legislation that would compel the Corporation to remove the reputational risk assessment.
This bill is passing through committee, but it is very far from becoming law. The FDIC is pre-empting a lengthy legislative battle by acquiescing to its demands regarding crypto debanking.
President Trump has identified an end to Operation Choke Point 2.0 as a high priority for his administration. The involvement of his Crypto Czar is a further sign of his concern.
Last December, Trump suggested abolishing the FDIC over its role in crypto debanking, but that drastic step has proved unnecessary.
As President Biden’s term in office came to an end, FDIC members like Travis Hill started openly criticizing the Corporation’s role in crypto debanking.
Hill is currently the new Acting Chair, and the FDIC has enthusiastically released tranches of documents detailing its involvement in Operation Choke Point 2.0. Today, it’s getting ahead of criticism once again.
This development could have substantial knock-on effects on the entire financial sector. Obviously, the FDIC’s activities hampered the crypto industry, but debanking efforts also extended to other sectors.
The FIRM Act has drawn criticism, as some commentators worry that drastically looser rules could help bad actors and unfairly targeted firms.
Still, as far as the crypto industry is concerned, this is just one step in a broader trend. Since President Trump took office, the entire financial regulatory apparatus has taken on a sweeping pro-crypto attitude.
The FIRM Act may be totally unnecessary now, and it looks like the FDIC is joining the industry-friendly wave.
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