📉 The Federal Reserve has taken an unexpected step toward embracing the crypto sector. It has officially removed the concept of “reputational risk” from its bank evaluation framework, meaning financial institutions will no longer be penalized for working with controversial industries — such as crypto — as long as the activity is legal.

Fed Gives Banks the Green Light to Work with Crypto Without Image Concerns

The term “reputational risk” has long been criticized by banks for being vague and subjective. Many claimed regulators abused it to justify interfering with legal business partnerships — especially in crypto.

Now, the Fed has reversed course. In a new statement, it announced that all references to reputational risk will be deleted from internal guidance and supervisory manuals. Inspectors will instead focus on clear financial risks like liquidity, credit exposure, and operational systems.

In effect, banks will no longer be judged based on how something might look to the public if it is lawful and profitable. This aligns the Fed with agencies like the FDIC and OCC, which already removed similar rules.

Trump Pressures Fed: Cut Rates or Face the Blame

This change comes as the central bank faces intense political pressure. President Donald Trump, now back in the White House, has ramped up public attacks on Fed Chair Jerome Powell, calling him a "total and complete idiot" on social media last week.

Behind the insults lies a clear demand: slash interest rates from 4.3% to 1–2% to ease the burden of servicing national debt. Trump warned that if Powell refuses, he’ll blame him for any economic downturn.

Internal Division at the Fed, Congress Demands Answers

Jerome Powell responded:

“From our perspective, it’s simple — we want a stable U.S. economy.”

On Tuesday, Powell is set to testify before Congress, where lawmakers are expected to grill him about crypto-related rule changes and the political pressure from Trump.

Meanwhile, signs of a rift are emerging within the Fed. So far, only two officials — both appointed by Trump — have expressed support for cutting rates in July. One of them, Michelle Bowman, stated on Monday that rising unemployment worries her more than inflation — a notable shift from the usual focus on price stability.

Powell’s term ends in less than a year. Trump would like to replace him sooner, but the Supreme Court recently blocked the president’s ability to remove federal commissioners at will, effectively shielding Powell — for now.

Instead, Trump is considering a different move: announcing Powell’s successor early. This would create a “shadow chair” who could begin to undermine Powell’s authority in real time. But this plan carries risks. A candidate seen as too loyal to Trump may lose credibility with markets and Fed officials.

Conclusion: Fed Caught Between Crypto Reforms and Political Fire

While the Fed’s move marks a major step toward regulatory relief for banks working with crypto, it finds itself caught between two powerful forces — institutional stability and a president unafraid to wage public battles with the central bank.




#Fed ,#TRUMP , #DigitalAssets , #USPolitics , #JeromePowell

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