U.S. Senator Tim Scott proposed a bill aimed at preventing the regulation of banks on the grounds of "reputational risk."

ChainCatcher news, according to The Block, U.S. Senate Banking Committee Chairman Tim Scott has proposed a bill aimed at prohibiting regulators from overseeing banks on the grounds of "reputational risk." This move comes in response to accusations from the crypto industry that U.S. government agencies are excluding it from the financial system.

The Republican senator from South Carolina submitted the bill on Thursday and stated in a press release that the legislation would "limit the weaponization of federal banking agencies and eliminate the power of regulators to use 'reputational risk' in the regulatory process."

The Federal Reserve defines "reputational risk" as: "The risk of loss resulting from negative public opinion (whether true or not) regarding an institution's business practices, which may result in a loss of customers, costly litigation, or revenue decline."