Senator Tim Scott, the ranking Republican on the Senate Banking Committee, has introduced a bill to prevent regulators from using reputational risk as a factor in supervising banks.
The Financial Integrity and Regulation Management Act seeks to address concerns that financial institutions are avoiding certain customers due to political pressure or public perception.
Tim Scott’s Banking Bill Aims to End Regulatory ‘Reputational Risk’ Policies
The Wall Street Journal first reported the bill’s introduction on Thursday morning.
Scott’s proposal, introduced with support from 11 other Republican senators, is a response to growing concerns over “debanking,” a term used to describe financial institutions cutting ties with businesses or individuals based on perceived risks to their reputation.
Crypto companies have been vocal about the issue, arguing that federal regulators have used it as a pretext to limit their access to banking services.
President Donald Trump also weighed in recently, criticizing Bank of America and JPMorgan Chase for allegedly closing accounts linked to conservative figures.
The bill would eliminate all references to reputational risk in regulatory oversight, preventing agencies from using it to justify supervising or penalizing banks.
The Federal Reserve currently defines reputational risk as the potential for negative publicity, whether true or not, to impact a bank’s customer base, revenue, or legal standing.
Scott argued that regulators have exploited this concept to push a political agenda against certain legally operating businesses.
“It’s clear that federal regulators have abused reputational risk by carrying out a political agenda against federally legal businesses,” Scott said in a statement.
“This legislation is the first step in ending debanking once and for all.”
Eleven Republican senators have supported the bill, including Mike Crapo, Cynthia Lummis, Katie Britt, and Bernie Moreno.
Additionally, industry groups such as the American Bankers Association, the Blockchain Association, and the Bank Policy Institute have backed the proposal.
Crypto firms have welcomed the effort, as they have frequently cited regulatory hostility as a barrier to maintaining banking relationships in the U.S.
Scott’s bill follows another measure co-sponsored by Sen. Kevin Cramer of North Dakota, which would require banks to do business with all legally compliant and creditworthy customers.
While that proposal has faced resistance, Scott’s legislation may have a clearer path forward, as it focuses on removing reputational risk rather than mandating specific banking practices.
U.S. Senate Banking Committee Gears Up for Pivotal Crypto Hearing
With a new leadership shift, the U.S. Senate Banking Committee is set to hold a crucial hearing on crypto regulations.
Senator Tim Scott, now leading the committee, has voiced strong support for digital assets, raising expectations for more constructive discussions.
Industry representatives from Kraken and Lightspark will join legal experts to offer insights on regulatory frameworks that could foster innovation while ensuring market stability.
The hybrid-format hearing will feature testimony from key figures, including Lewis Cohen of Cahill Gordon & Reindel LLP, Jonathan Jachym from Kraken, and Jai Massari of Lightspark.
Discussions will focus on market structure, stablecoin regulations, and the possibility of a strategic Bitcoin reserve. Lawmakers aim to balance oversight and innovation, positioning the U.S. as a global leader in digital finance.
This hearing follows mounting regulatory scrutiny and ongoing calls for clearer compliance measures. The outcome could shape the future of U.S. crypto policy and influence global market dynamics.
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