Trump Order Targets Crypto ‘Debanking’ Over Reputational Risk

A quiet Thursday saw a significant shift for the digital asset world. President Trump signed an executive order, aiming to stop what many in the crypto space call “unfair banking practices.” It felt like a long-awaited moment for an industry often viewed with suspicion by traditional finance.

• The executive order aims to address “unfair banking practices” that have plagued the crypto industry. This is seen as a positive step by many in the digital asset space.
• The order is intended to combat the practice of “debanking,” where crypto firms have had their accounts closed without clear justification. This has caused significant operational challenges.
• The order is a response to concerns about “Operation Choke Point 2.0,” which critics say has unfairly targeted the crypto industry. The order seeks to bring transparency and accountability to the financial system.

For years, crypto firms and individuals have told stories of their bank accounts being closed without clear reason. They spoke of payrolls frozen and everyday business operations grinding to a halt. It was a frustrating situation, to say the least.

The White House released a fact sheet. It stated that the digital assets industry has been a target of “unfair debanking initiatives.” These practices, the sheet noted, “erode public trust in banking institutions and regulators, harm livelihoods, freeze payrolls, and impose significant financial burdens on law-abiding Americans.”

At the heart of this order is a term called “reputational risk.” The Federal Reserve defines this as the “potential that negative publicity regarding an institution’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions.”

Think of it like this. A bank might worry that doing business with a crypto company could make them look bad. Maybe some news story, true or not, paints crypto in a negative light. The bank then fears losing customers or facing lawsuits. So, they might just decide it is easier to avoid crypto altogether.

Critics of this approach have argued that regulators used this broad authority to quietly push banks away from the digital asset industry. It was a subtle pressure, perhaps, but one that had real consequences for businesses trying to operate in a new field.

President Trump had been hinting at such an order for months. He had heard the complaints from crypto firms. He had promised to put an end to something many called “Operation Choke Point 2.0.”

This phrase, “Operation Choke Point 2.0,” refers to actions taken by federal regulators. The goal was to restrict how financial institutions could engage with the crypto industry. It sounded a bit like a sequel to a movie you never wanted to see.

The term was coined in 2023 by Nic Carter, a co-founder of Castle Island Ventures. He drew a comparison to the original Operation Choke Point. That was a 2013 U.S. Department of Justice initiative.

The 2013 effort sought to limit banking services for industries considered high-risk for fraud and money laundering. These included payday lenders and firearm dealers. The crypto community felt they were being lumped into a similar category, unfairly.

It is a bit like being told you cannot use the public library because your friend once returned a book late. The rules start to feel a little too broad, perhaps even a bit unfair.

The issue has not been confined to executive orders. It has also come up in Congress. Senate Banking Committee Chair Tim Scott, for example, has been working to push a bill.

This bill would “curtail the weaponization of federal banking agencies.” It aims to do this by “eliminating the ability for regulators to use reputational risk as a component of supervision.” It shows a bipartisan concern, even if the solutions differ.

Interestingly, some federal regulators had already started to shift their stance. The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) had pledged to stop weighing “reputational risk” when evaluating banks’ customer relationships.

This suggests a growing understanding, or at least an acknowledgment, of the crypto industry’s pushback. It is a sign that the message about unfair practices was starting to land.

Republican lawmakers quickly voiced their support after President Trump signed the order. House Financial Services Committee Chair French Hill, from Arkansas, called it an “important step.”

Hill stated, “Targeting Americans for their political beliefs undermines the freedoms our country was built upon and should have no place in our financial system.” He went on to commend President Trump for taking “decisive action to protect all Americans from politically motivated financial discrimination.”

Sen. Cynthia Lummis, from Wyoming, echoed a similar sentiment. She has long been a vocal supporter of digital assets. Her words carried weight for many in the crypto space.

She took to X, formerly known as Twitter, to share her thoughts. Her message highlighted the perceived overreach of unelected officials.

Lummis’s post on X pointed to what she saw as bureaucrats picking “winners and losers.” She argued this was based on political preferences, not sound policy. Her words resonated with many who felt the system was stacked against them.

She called President Trump’s executive order a “critical step.” It would bring transparency and accountability, she said. This was important for an industry that felt it had been lorded over for too long.

So, what does this all mean for the crypto industry? It is a signal, perhaps, that the tide is turning. Banks might feel more comfortable engaging with digital asset companies. The fear of regulatory backlash, at least from the “reputational risk” angle, could lessen.

It does not mean all challenges are gone. The digital asset space still faces plenty of scrutiny. But this executive order removes one significant hurdle. It offers a clearer path for legitimate crypto businesses to access essential banking services.

Will it truly end “debanking” for good? That remains to be seen. But for now, it feels like a breath of relief for many in the crypto world. It is a step toward a more level playing field, where innovation might find a bit more room to grow.