David Sacks, the white house director of encryption and AI, commended the FDIC’s decision to remove reputation risk as a factor in bank supervision. He said the practice sounded good in theory, but negatively affected legitimate crypto companies.
David Sacks, the white house director of encryption and AI, commented on the Federal Deposit Insurance Corporation’s (FDIC) move to eliminate reputation risk as a bank supervision factor. The director emphasized that banks needed to be objective in their supervision.
David Sacks praises the FDIC decision eliminating reputational risk from regulatory standards
The Federal Deposit Insurance Corporation(FDIC) decision followed the passing of the FIRM Act sponsored by Senator Tim Scott. The FIRM Act aims to eliminate reputational risk considerations across all federal banking regulators.
Big win for crypto: @FDICgov is following @USOCC's lead in removing “reputational risk” as a factor in bank supervision. “Reputational risk” may sound good in theory, but it was defined as “the potential that negative publicity regarding an institution’s business practices,… https://t.co/IAtw5JnykS
— David Sacks (@davidsacks47) March 25, 2025
The decision came after the Office of the Comptroller of Currency (OCC) announced it would no longer treat reputation risk as a standalone category in its supervision of national banks and savings associations.
Under the new policy, the OCC was instructed to discontinue reputation risk assessment in its supervision. The OCC was directed to evaluate such concerns through the different established risk areas, such as operational and compliance.
The office was asked to consider such areas only when they impact bank safety. The OCC staff was directed to review examination manuals and remove references to reputation risk.
David Sacks said the concept of reputational risk as a concept had the potential to cause negative publicity regarding institutions’ business practices, whether true or not, to cause a decline in the customer base.
He added that it could also lead to costly litigation and revenue deductions. Sacks argued that it had been used subjectively to justify the debanking of lawful businesses, including those in the crypto sector.
The director said the removal of the criteria from supervisory requirements was a win for the crypto space. Sacks insisted that banking supervision needed to be objective. He added that quantitative criteria were necessary rather than speculative concerns about public perception.
Eleanor Terret, a financial journalist, argued that removing reputational risk aligns with efforts to protect legal businesses, including those in the crypto sector, from unjustified financial exclusion.
Trump’s administration pushes for a friendly crypto regulatory environment
The announcement came amid increased optimism in the industry after the US Securities and Exchange Commission supported a new regulatory proposal aimed at improving the regulation of digital asset securities. CoinRegTech introduced the legislation that seeks to improve market structure and investor protection within the crypto sector.
CoiRegTech recommended regulatory updates, such as ensuring that trading platforms that handle digital asset securities implement stronger structural safeguards. The proposal also suggested amendments to the Securities Exchange Act to improve transaction transparency.
The proposal also introduced the Digital Asset Electronic Reporting System(DART). The system will be a collaborative effort between the Commodity Futures Trading Commission and the regulator. It also aims to centralize digital asset transaction records by capturing both on-chain and off-chain trades to enhance transparency.
The FDIC’s decision aligned with Trump’s call for stablecoin regulation. The US president outlined his vision to position the country as a global leader in digital assets. He urged Congress to enact legislation to create clear rules for stablecoins and other cryptocurrencies within the country.
Speaking at the Digital Assets Summit in New York, he emphasized that his administration was committed to making the United States the Bitcoin superpower and crypto capital of the world.
Trump said the US digital asset stockpile and Bitcoin Reserve would enhance the federal government’s long-term crypto holdings. He also criticized the Biden administration for selling cryptocurrency which the judiciary had ceased at undervalued prices. The president also promised to end the hostility against digital assets.
The US Senate introduced the Generating Necessary Information for Uncovering Stablecoins (GENIUS) Act after Trump took office. The bill will increase regulatory oversight while promoting financial innovation.
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