Last updated on March 6th, 2026 at 09:42 am
The US Federal Reserve issued a formal proposal on Monday, February 23, 2026, to codify a ban on using “reputation risk” as a basis for bank supervision, a move intended to halt the controversial practice known as Operation Chokepoint 2.0.
The proposal, which is now open for a 60-day public comment period, seeks to prevent examiners from pressuring financial institutions to terminate accounts of lawful businesses, including those in the blockchain and digital asset sectors, based on subjective or political criteria.
By shifting the focus exclusively to objective financial risk management, the Fed aims to ensure that banks make client decisions based on safety and soundness rather than the “disfavoured” status of an industry.
It’s not the Fed’s role to play both judge and jury for banking digital asset companies. Glad to see this important step to permanently remove “reputation risk” from Fed policy and put Operation Chokepoint 2.0 to rest so America can become the digital asset capital of the world. pic.twitter.com/G6rUnXtCSw
— Senator Cynthia Lummis (@SenLummis) February 23, 2026
Restoring objective standards in bank examinations
Michelle Bowman, the Fed’s Vice Chair for Supervision, highlighted that the central bank has received troubling cases where supervisors exerted undue pressure on lenders to debank customers over religious beliefs, political views, or legal business activities.
The new rule would explicitly prohibit examiners from penalising or prohibiting a firm from providing services to any customer engaged in legal activity.
This follows a broader administrative shift initiated last year when the Fed first directed its supervisors to stop using reputation risk as a lever for enforcement.
A victory for the Web3 industry
The proposal has drawn significant praise from crypto advocates and legislators who have long argued that the digital asset space was unfairly targeted by federal regulators.
Senator Cynthia Lummis lauded the step on social media, stating that it is not the Fed’s role to act as “judge and jury” for digital asset companies.
Industry leaders, including Alex Thorn of Galaxy Digital, noted that this move continues the systematic rollback of Chokepoint 2.0, a term coined to describe the coordinated effort to stifle the crypto industry’s access to traditional banking rails.
Meanwhile, the U.S. Commodity Futures Trading Commission (CFTC) has established a powerful 35-member Innovation Advisory Committee (IAC) to address rapidly evolving technologies such as blockchain and artificial intelligence in derivatives and commodity markets.
Enjoyed this piece? Bookmark DeFi Planet, explore related topics, and follow us on Twitter, LinkedIn, Facebook, Instagram, Threads and CoinMarketCap Community for seamless access to high-quality industry insights.
“Take control of your crypto portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”
