U.S. Fed seeks public comment on ending “Operation Chokepoint 2.0”

The Federal Reserve Board of Governors on February 23 proposed a rule to formally remove “reputation risk” as a factor in its bank supervision standards, a shift aimed at ending a controversial practice critics call Operation Chokepoint 2.0.

Fed moves to end ‘Operation Chokepoint 2.0’

Under the proposal, the Fed would clarify that examiners must focus on concrete financial risks such as credit, liquidity, and compliance issues rather than on subjective concerns about a bank’s public image. The rule is now open for a 60-day public comment period after publication in the Federal Register.

Vice Chair for Supervision Michelle W. Bowman said the Fed has heard “troubling cases of debanking where supervisors use concerns about reputation risk to pressure financial institutions to debank customers because of their political views, religious beliefs, or involvement in lawful but disfavored businesses.”

She added that discrimination on those bases “does not have a role in the Federal Reserve’s supervisory framework.”

Operation Chokepoint 2.0 refers to a period in recent years when some lawmakers and industry advocates alleged that federal regulators and bank supervisors pressured banks to cut off services to lawful firms, especially in the cryptocurrency sector, by invoking vague reputational concerns. They say this made it harder for digital asset companies to open or maintain bank accounts.

The term echoes the original 2013 Operation Choke Point, a Department of Justice initiative that targeted certain “high-risk” legal businesses such as payday lenders and firearm dealers by encouraging banks to limit their services.

The proposal resonates with political efforts dating back to 2025, when the Trump administration issued an executive order aimed at ending the informal debanking pressures associated with Operation Chokepoint 2.0, which had discouraged banks from providing services to certain lawful sectors, including cryptocurrency firms.

Wyoming Senator Cynthia Lummis welcomed the Fed’s proposal on social media platform X, saying she hopes it will finally put Operation Chokepoint 2.0 to rest and help the United States become a global hub for digital assets.

Supporters of the regulatory shift say it will make supervision more predictable and fairer for all lawful sectors, not just cryptocurrency firms.