The Federal Reserve (FED) has ceased using "reputational risk" as the basis for regulating banks' Crypto Assets.

According to Gate News bot, Coindoo reported that The Federal Reserve (FED) announced that it will no longer consider "reputational risk" as a factor in bank examinations. In a policy shift disclosed a few minutes ago, the Central Bank stated that it has begun reviewing references to reputational risk in its regulatory materials and will replace them with more measurable financial risk standards when appropriate.

The Federal Reserve emphasizes that it still wants banks to maintain strong risk management practices, but it clarifies that regulators will now focus more on quantifiable threats to safety and soundness, rather than risks related to subjective or public perception. The Federal Reserve stated in an official announcement: "This change does not eliminate the Federal Reserve's expectation for banks to maintain strong risk management practices."

The Chairman of the Federal Reserve, Jerome Powell, promised earlier this year to amend the regulatory language that allows regulators to monitor banks' "controversial statements or activities." Today's update indicates that Powell has fulfilled this promise, marking that the Federal Reserve is readjusting its approach to compliance enforcement and bank business assessment.

This move aligns the actions of the Federal Reserve (FED) with those of other federal banking agencies. In March of this year, the Federal Deposit Insurance Corporation (FDIC) notified Congress that it would remove "reputational risk" from its supervisory manual. Similarly, the Office of the Comptroller of the Currency (OCC) also announced plans to remove the term from its supervisory guidance.

This policy change may be welcomed by Republican lawmakers and advocates of the cryptocurrency industry. Critics have long argued that reputational risks allow regulators to unfairly penalize banks that work with politically sensitive clients or cryptocurrency companies—even if those clients do not pose a direct financial threat.

By eliminating this broad and often ambiguous standard, the Federal Reserve (FED) may reduce barriers for banks serving non-traditional or controversial industries, while still holding them accountable for core financial stability.