Senator Lummis Criticizes Fed’s Crypto Retreat as “Lip Service”

Despite withdrawing some Biden-era restrictions, the Federal Reserve faces mounting criticism from crypto advocates.

The Federal Reserve has rescinded several key pieces of guidance that warned banks about engaging with the crypto industry. While some in the digital assets community welcomed the move, U.S. Senator Cynthia Lummis remains skeptical, calling the action little more than “lip service.”

On Friday, April 25, Lummis, a long-time Bitcoin supporter and Republican Senator from Wyoming, blasted the Fed’s decision. She argued that despite pulling back some regulations, the central bank continues to obstruct crypto innovation behind the scenes.

Access to Master Accounts Still Blocked

Lummis pointed out that crypto-friendly banks are still struggling to obtain master accounts—essential for direct access to the Fed’s payment system. Institutions like Custodia Bank have even resorted to legal action after experiencing long delays in their applications.

The Senator also criticized the Fed for continuing to label crypto-related activities as “unsafe and unsound.” She noted that the Policy Statement on Section 9(13), which singles out Bitcoin and other digital assets, remains in place.

Reputation Risk Remains a Barrier

Another concern raised by Lummis is the Fed’s continued use of “reputation risk” standards when supervising banks. This controversial practice allows regulators to deny services to industries that are legal but perceived as risky, such as crypto, oil, and marijuana. While the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) have scaled back reliance on reputation risk, Lummis argues that the Fed has not.

“Until the digital asset industry gets more than a life jacket, Chair Powell—they need a fair shake,” Lummis stated on X (formerly Twitter).

Crypto Debanking and “Operation Chokepoint 2.0”

Lummis further linked the Fed’s actions to what many in the industry call “Operation Chokepoint 2.0″—an alleged coordinated effort to restrict crypto companies’ access to banking services. This practice gained notoriety after the collapse of FTX in 2022 and intensified during the Biden administration.

Fed Chair Jerome Powell acknowledged in February that complaints about crypto “debanking” were serious, noting that regulators needed to better understand and address the problem.

Despite the recent rollback of several crypto-related restrictions, key hurdles for digital asset companies remain. Analysts like Alex Thorn of Galaxy Digital have warned that the Fed’s failure to rescind all its anti-crypto guidance could continue to create uncertainty for state-chartered banks looking to offer crypto services.

What It Means For You [NFA]

If you’re in the U.S. banking or crypto sector, the Fed’s partial rollback may offer some breathing room—but major regulatory barriers remain. Until broader access to services like master accounts is guaranteed, crypto innovation in the U.S. could still face serious headwinds. Stay cautious and closely monitor evolving policy updates if you’re building or investing in this space.