U.S. government employees who own digital currencies can’t have any input into matters involving the digital assets they own, according to new ethics rules.
This week, Emory A. Rounds III, director of the U.S. Office of Government Ethics (OGE), issued a legal advisory on the Application of the Securities and Mutual Fund Exemptions to Cryptocurrency, Stablecoins, and Related Investments. The advisory was directed at all designated agency ethics officials and aims to limit the influence that federal government staff might have over matters—including crafting policy and regulations—that involve the digital assets they might personally possess.
Specifically, the OGE states that “an employee who holds any amount of a cryptocurrency or stablecoin may not participate in a particular matter if the employee knows that particular matter could have a direct and predictable effect on the value of their cryptocurrency or stablecoins.”
There are exceptions to this rule, including a pass for staff holding less than $50,000 in so-called ‘diversified’ mutual funds, which are defined as having “a stated purpose of concentrating investments in cryptocurrencies, stablecoins, cryptocurrency or stablecoin derivatives, or cryptocurrency or stablecoin services.” Similarly, mutual funds that invest in crypto-mining hardware, such as ASIC gear, “will be considered computer hardware sector funds.”
The perpetual argument over whether digital assets are securities or commodities may get a modest boost from the OGE stating that “cryptocurrency and stablecoins are not ‘publicly traded securities’ for purposes of OGE’s regulations,” although this position isn’t actually anything new on the OGE’s behalf.
Regardless, the limited carveouts for federal staff will likely be treated as heresy in cryptoville, where saying anything and everything that pumps your personal bags is not only not frowned upon but downright encouraged. I mean, how else do you explain Voyager Digital flat out lying to its customers by telling them their deposits were federally insured? I mean, they might not have given Voyager their money otherwise. Like, duh.
Legislators not impacted
Crucially, the OGE rules don’t apply to federally elected representatives or senators, so the likes of Senators Cynthia Lummis (R-WY) and Kristen Gillibrand (D-NY) can continue to trawl for campaign contributions by promoting legislation that aims to bring crypto assets in from the regulatory cold.
The bipartisan pair’s Responsible Financial Innovation Act seeks a greater role for the U.S. Commodity Futures Trading Commission (CFTC) while minimizing the Securities and Exchange Commission (SEC). Crypto bros like FTX/Alameda’s Sam Bankman-Fried would prefer oversight of most crypto assets to be handled by the CFTC, which has far fewer investigative assets than the SEC and lacks a leader with a jones for busting crypto bros.
Sadly for the bag-pumpers, the odds of the Lummis-Gillibrand bill passing in the current session are slim to none. There’s the usual congressional summer break and then mid-term elections in November, not to mention numerous items of vastly more significance than making magic internet money slightly less of a threat to John Q. Public’s retirement plans.
That is, unless that ethically altruistic SBF fellow stops writing checks to bail out struggling crypto platforms (aka acquire distressed assets on the cheap) long enough to write even bigger checks to federal pols’ favorite charities: themselves.
A nothing-royale with cheese
Thursday saw the U.S. Treasury Department publish a fact sheet on its Framework for International Engagement on Digital Assets. The document is the first follow-up to the executive order on digital assets that President Biden issued in March and maps out how the feds plan to ensure smooth regulatory sailing on both the interagency and international fronts.
Basically, ‘Murica wants to ensure it doesn’t lose its place at the front of the global financial parade, so it plans to cooperate with other G7/G20/OECD nations, as well as with the Financial Stability Board, the Financial Action Task Force, the Egmont Group of Financial Intelligence Units, the IMF/World Bank and other Multilateral Development Banks, as well as a host of other standard-setting bodies.
Truth be told, the document’s a bit of a nothingburger, like calling a meeting to discuss when to hold future meetings. But its release was apparently enough to send the fiat value of most digital tokens on a sharp upward trajectory on Thursday afternoon, which is so, so sad. It’s like getting excited because the old man in the White House didn’t order you off his lawn, he simply pointed out that it’s his lawn, and that apparent leniency set everyone’s little financial hearts a-flutter. Either that or we finally had a whole day this month in which another major crypto platform didn’t go belly-up. It’s a rich tapestry.
Watch: BSV Global Blockchain Convention, Law & Order: Regulatory Compliance for Blockchain & Digital Assets
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