To its credit, the Federal Reserve has modernized its guidelines. This ongoing shift is expected to increase banking access for cryptocurrency-related companies and other industries previously viewed as posing a “reputational risk.” This move follows widespread alarm that Operation Chokepoint 2.0 was discriminating against entire industries within the United States.

Industries that have been on the high-risk list, like adult entertainment for example, have historically faced challenges in building and sustaining banking relationships. This continued to create severe barriers to entry and expansion.

The Federal Reserve’s recent turn reflects an understanding that we can’t keep on this course and requires a different, more balanced approach. That way, it protects law-abiding businesses from being deprived of key banking services without cause.

Nonetheless, this entire debate hinges on one key term — “reputational risk.” It’s often invoked as a rationale for refusing to serve companies in industries considered morally objectionable.

"reputational risk" - Federal Reserve

Critics claimed that this vague business wrongdoer definition resulted in a de facto anti-competitive blacklisting of whole industries, hindering innovation and competition.

Operation Chokepoint 2.0 to combat the war on illicit finance. It has been widely criticized for allegedly targeting legitimate businesses while purporting to address risk. This has created major headaches for businesses in highly regulated industries like crypto, firearms, and tobacco.

The Federal Reserve's adjustment signals a move towards a more nuanced approach to risk assessment, one that considers the specific activities and compliance measures of individual businesses rather than relying on broad generalizations about entire industries. This amendment would go a long way towards creating greater stability and fostering growth in the crypto space.