Senator Tim Scott is backing new legislation aimed at preventing federal regulators from using “reputational risk” as an excuse to bar banks from working with certain clients, particularly in the cryptocurrency industry.
Republicans have raised concerns about this issue in recent congressional hearings, noting that in the past, cryptocurrency businesses have often been excluded from banking services because regulators like the Federal Reserve, FDIC, and OCC do not want them to participate in the system due to concerns about negative consequences to banks’ reputations.
Tim Scott’s FIRM Act Aims to Protect Cryptocurrencies
Tim Scott, chairman of the Senate Banking Committee, has rallied support from fellow Republicans for the Financial Integrity and Regulatory Management Act (FIRM Act). The bill would essentially prevent regulators from considering a bank’s reputation as a factor in determining whether it is safe and sound to do business with certain customers, such as those in the cryptocurrency industry.
“It is clear that federal regulators have abused reputational risk by pursuing a political agenda against legitimate federal businesses. This legislation, which removes all reference to reputational risk from regulatory oversight, is the first step in ending bank failures once and for all,” said Chairman Scott.
Scott joined other Republicans on the Senate Banking Committee, including Sen. Cynthia Lummis. Lummis, who chairs the Senate Banking Subcommittee on Digital Assets, believes the United States needs clear and transparent rules that support the growth of digital assets (like cryptocurrencies) rather than restricting them with excessive government control. “We are putting these rogue regulators on notice — their days of unchecked power are over,” she added in a statement.
“Financial regulators have used ‘reputational risk’ to target people and businesses they don’t like, hiding behind this open and subjective concept,” said Senator Tillis. “The FIRM Act stops this weaponization of politics and ensures regulators focus on real financial risks, not personal or political agendas.
Cryptocurrency has found strong allies in the GOP, especially as President Trump has embraced the industry. Trump has also criticized banks for refusing to work with conservatives, adding to the debate over debanking.
