Main Points:
- Regulatory Easing: The U.S. Office of the Comptroller of the Currency (OCC) has announced the conclusion of its investigation into “reputation risk” for banks serving crypto firms, signaling an end to the so-called “Choke Point 2.0” restrictions.
- Guidance Update: Future OCC guidance and handbooks will remove references to reputation risk as a basis for restricting banks’ services to cryptocurrency companies.
- Focus on Risk Management: OCC Acting Comptroller Rodney E. Hood emphasized that supervision should be based on risk management, not on subjective public perception.
- Industry Reaction: Crypto bank custodian, Custodia Bank CEO Caitlin Long, welcomed the move, arguing that reputation risk has been used in a politically motivated manner to suppress the crypto industry.
- Context and Leadership: This shift aligns with the Trump administration’s broader policy reversal on crypto restrictions, with new leadership under Jonathan Gould poised to further support crypto-friendly regulation.
1. Regulatory Easing in Crypto Banking
On March 20, the OCC announced that its investigation into the so-called “reputation risk”—previously used as a rationale for limiting banking services to crypto and fintech companies—has concluded. As part of its regulatory easing measures, the OCC plans to remove references to reputation risk from its supervisory handbooks and guidance documents. This marks a significant departure from past practices where banks’ involvement with crypto firms was often treated as a reputational liability.
2. Shifting Focus Toward Objective Risk Management
OCC Acting Comptroller Rodney E. Hood explained that the OCC’s role is to assess risk based on sound risk management practices, rather than on how a bank’s activities are perceived by the public. He stressed that while banks must continue to manage risks carefully, the agency will no longer use reputation risk as a pretext to interfere in banks’ strategic decisions. This shift is seen as a welcome relief for crypto companies seeking broader access to banking services.
3. Industry Response and Political Context
The move has been positively received within the crypto industry. Caitlin Long, CEO of Custodia Bank—a crypto custodian—remarked that reputation risk is inherently subjective and has historically been used by banking regulators with political motives to restrict access for crypto firms. This development comes in the wake of similar policy rollbacks by the Trump administration, which has been actively dismantling measures like “Choke Point 2.0” that previously constrained the crypto sector.
Additionally, the nomination of Jonathan Gould as the new OCC Comptroller is expected to further tilt the regulatory landscape in favor of crypto-friendly policies. Gould, known for his supportive stance on digital assets from his previous roles, is set to face a Senate Banking Committee hearing soon.
4. Background: Operation Choke Point and Its Evolution
The term “Operation Choke Point” originally referred to measures implemented in 2013 that restricted banking services for high-risk industries such as gun sales. The “Choke Point 2.0” initiative extended similar restrictions to crypto companies. With this latest move, the OCC is effectively ending these restrictions, reflecting a broader shift in regulatory attitudes under the Trump administration. This change not only promises to ease the burden on crypto firms but also aims to refocus regulatory efforts on truly significant risk areas.
5. Conclusion
In summary, the OCC’s decision to conclude its review of reputation risk and remove related language from its guidance marks a pivotal moment for the crypto industry. By shifting the focus to objective risk management rather than subjective reputation concerns, this move is expected to unlock further banking services for crypto firms. With the political backing of the Trump administration and the incoming leadership of Jonathan Gould, the regulatory environment for digital assets in the U.S. is poised for significant transformation. This development is likely to foster greater innovation and expansion within the crypto sector while ensuring that risk management remains robust.
