Senator Tim Scott Pushes for Law to End ‘Reputational Risk’ in Crypto Debanking

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Senator Tim Scott is advocating for a new law to stop federal regulators from using “reputational risk” as an excuse to stop banks from working with certain customers, particularly in the crypto industry.

Republicans have raised concerns about this issue in recent congressional hearings, highlighting how, in the past, crypto businesses were often excluded from banking services because regulators like the Federal Reserve, FDIC, and OCC didn’t want them in the system, fearing negative consequences for the banks’ reputations.

Tim Scott’s FIRM Act To Protect Crypto

Tim Scott, chairman of the Senate Banking Committee, has gathered support from fellow Republicans for the Financial Integrity and Regulation Management Act (FIRM Act). Essentially, the bill would 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, like those in the crypto industry.

“It’s clear that federal regulators have abused reputational risk by carrying out a political agenda against federally legal businesses. This legislation, which eliminates all references to reputational risk in regulatory supervision, is the first step in ending debanking once and for all,” said Chairman Scott.

Scott was joined on the bill by his fellow Republicans on the Senate Banking Committee, including Sen. Cynthia Lummis. Lummis, who chairs the Senate Banking Subcommittee on Digital Assets, believes that the U.S. needs clear and transparent rules that support the growth of digital assets (like cryptocurrency) rather than restrict them with excessive government control. “We’re 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-ended and subjective concept,” said Senator Tillis. “The FIRM Act stops this political weaponization and ensures regulators focus on real financial risks, not personal or political agendas.

Crypto has found a strong ally in the GOP, especially with President Trump supporting the industry. Trump has also criticized banks for refusing to work with conservatives, adding fuel to the debanking debate.