On February 23, the Federal Reserve Board of Governors proposed a rule to formally remove “reputational risk” as a factor in its banking supervision standards, a change aimed at ending a controversial practice that critics call “Operation Chokepoint 2.0.”
Fed ends “Operation Chokepoint 2.0”
Under this proposal, the Fed would clarify that examiners must focus on concrete financial risks such as credit, liquidity and compliance issues rather than subjective concerns about a bank’s public image. The rule is now open for a 60-day public comment period following publication in the Federal Register.
Vice Chair for Supervision Michelle W. Bowman said the Fed has heard “troubling cases of debanking in which supervisors use concerns about reputational risk to pressure financial institutions to exclude customers based on their political views, religious beliefs, or involvement in legal but disadvantaged businesses.”
She added that discrimination on these grounds “has no role in the Federal Reserve’s supervisory framework.”
Operation Chokepoint 2.0 refers to a period in recent years in which some lawmakers and industry advocates alleged that federal regulators and banking supervisors were pressuring banks to suspend services to legal businesses, particularly in the cryptocurrency sector, citing vague reputational concerns. They say this has made it more difficult for digital asset companies to open or maintain bank accounts.
The term echoes the original 2013 Operation Choke Point, a Justice Department initiative that targeted certain “high-risk” legal businesses such as payday lenders and gun dealers by encouraging banks to limit their services.
The proposal echoes policy efforts dating back to 2025, when the Trump administration issued an executive order aimed at ending informal banking squeezes associated with Operation Chokepoint 2.0, which had discouraged banks from providing services to certain legal industries, including cryptocurrency companies.
Wyoming Senator Cynthia Lummis praised the Fed’s proposal on social media platform X, saying she hopes it will finally end Operation Chokepoint 2.0 and help the United States become a global hub for digital assets.
Supporters of the regulatory change say it will make supervision more predictable and fair for all legal sectors, not just cryptocurrency companies.