Banking Regulators Formally Defined 'Unsafe or Unsound Practice' — Ending the Examiner Latitude That Enabled Crypto Debanking
On August 27, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation jointly published a final rule giving "unsafe or unsound practice" its first statutory definition in U.S. banking law: conduct that deviates from generally accepted prudent operational standards and has either already caused, or could reasonably cause, material financial harm to an institution or significant risk to the Deposit Insurance Fund. Before this rule, the phrase carried no legal definition; examiners used that ambiguity from 2022 onward to classify bank relationships with cryptocurrency firms as categorically problematic — the mechanism the industry called "Operation Chokepoint 2.0." Under the new framework, examiners may still issue supervisory observations about non-financial weaknesses, but corrective action authority is limited to findings tied to material financial risk or regulatory compliance. The rule takes effect 60 days after Federal Register publication.
Requiring examiners to anchor corrective action to documented material financial risk removes the primary supervisory tool used to pressure banks into dropping crypto clients — converting an informal enforcement posture into a rule-bound constraint that banks and their regulators can cite in future disputes.
