Coinbase has formally challenged what it describes as a “political” banking rule that it says was used to pressure banks into cutting ties with crypto firms, adding new weight to the growing U.S. debate over debanking and regulatory overreach.
In a public statement and a detailed comment letter submitted to federal regulators, the exchange accused banking supervisors of misusing the concept of “reputational risk” to quietly restrict lawful crypto activity during the Biden administration.
Coinbase Supports OCC, FDIC Plan to Remove Reputational Risk Standard
Faryar Shirzad, Coinbase’s chief policy officer, said the company supports a joint proposal by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to eliminate reputational risk from their supervisory frameworks.
Shirzad said that examiners at both agencies relied on the concept as a “supervisory hammer” to pressure banks into dropping crypto clients, a practice the industry has labeled Operation Chokepoint 2.0.
In its letter to the OCC and FDIC, Coinbase described reputational risk as vague, subjective, and untethered from measurable financial harm or legal violations.
The company argued that bank supervision should focus only on concrete risks tied to safety, soundness, and compliance with the law, warning that unquantifiable concerns about public perception create room for political bias.
Coinbase said reputational risk was used to discourage banks from providing core services to crypto firms even when their activities were legal.
The exchange said it experienced these pressures firsthand. Through Freedom of Information Act requests and subsequent litigation, Coinbase uncovered internal regulatory communications that it claims show crypto firms were singled out behind closed doors.
The company said those actions threatened its operations and disrupted banking access for employees, reflecting what it called a broader pattern of secret supervision that insulated regulators from public accountability.
Coinbase is urging regulators to go further than the current proposal by fully prohibiting any use of reputational risk or similar concepts in bank supervision.
It warned that partial limits would allow the practice to return under a different label, leaving banks free to cite public or political perception alongside other risks when denying services.
The company also called for clearer rules tying adverse supervisory actions to specific factors such as credit, liquidity, operational, or compliance risk.
U.S. Regulators Probe Bank Restrictions on Crypto Firms
The dispute sits at the center of a wider political fight over crypto debanking in the United States.
Crypto executives and Republican lawmakers have long argued that regulators used informal guidance, heightened scrutiny, and off-the-record warnings to push banks away from digital asset clients without issuing formal bans.
Regulators have consistently denied coordinating such an effort, saying banks made independent decisions based on anti-money-laundering obligations and safety concerns.
The issue intensified again in December after JPMorgan Chase CEO Jamie Dimon rejected claims that his bank engages in politically motivated debanking.
His comments followed public accusations from crypto figures, including Strike CEO Jack Mallers, who said his accounts were closed without a clear explanation.
Dimon said JPMorgan acts only under legal and regulatory requirements, not ideology, a stance echoed by other large banks facing similar allegations.
Regulators are now conducting their reviews, as in December, the OCC released preliminary findings showing that all nine of the largest U.S. national banks imposed inappropriate restrictions on lawful businesses between 2020 and 2023, including digital asset firms.
Comptroller of the Currency Jonathan Gould said the practices were widespread and amounted to an improper use of national bank charters.
The review was ordered under President Donald Trump’s August executive order directing agencies to ensure fair access to banking services.
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