Obscure Ethics Rule Blocks Tech Talent from Shaping US Crypto Policy

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With the transition of leadership in federal agencies, an ethics rule that is less known poses a potential challenge to the Trump administration’s plans for creating sensible digital asset policies. The Legal Advisory 22-04, issued by the Office of Government Ethics in 2022, has remained relatively unnoticed within the context of the Biden administration’s strict cryptocurrency regulations. However, its influence could be significant: it essentially prevents individuals who own cryptocurrencies, tokens, or stablecoins from holding federal positions.

For a new administration pledging to reinvigorate America’s lead in financial advancements, this situation poses an urgent test. Agencies such as Treasury, SEC, CFTC, and the Federal Reserve will require personnel knowledgeable about both conventional finance and digital currencies. However, existing ethical guidelines place potential appointees and public servants in a predicament: they must either sell off all holdings in this sector or forgo public service altogether.

The contrast here is quite notable. Financial regulators, like a Treasury official or a SEC lawyer, have the ability to invest in traditional institutions such as JP Morgan while shaping banking and securities policy, yet they are prohibited from owning any form of digital assets, even a small amount of bitcoin or stablecoins, when dealing with digital asset regulation. This restriction seems to unintentionally hinder the hiring of experts who possess valuable knowledge at a time when their expertise is crucial.

In my role as Senior Director for Industry Relations at the Blockchain Association, I collaborate with over a hundred pioneering firms in financial technology innovation. Many of these companies boast professionals who have extensive government backgrounds, offering invaluable perspectives that could greatly benefit federal positions. However, due to existing regulations, their specialized knowledge is often unavailable unless they’re prepared to relinquish all ties to the industry they are well-versed in.

One practical option is to revise the guidance from the Office of Government Ethics, enabling minimal ownership of digital assets, much like the present rules for conventional financial tools. This adjustment will preserve ethical principles while granting access to valuable expertise in this area. As an alternative, the incoming administration could swiftly overturn the advisory through an executive order – a move that would demonstrate a more equitable stance on cryptocurrency policy.

With nations such as Singapore, Switzerland, and the UAE rapidly defining their regulatory structures for digital assets, it is crucial that the U.S. government employs officials who are well-versed in both the benefits and potential pitfalls. Overly restrictive ethical guidelines not only hinder agencies but also weakens America’s position as a trailblazer in financial advancement.

To ensure a new administration that emphasizes efficient management and technological leadership can start strong, overcoming this hurdle should be a swift, achievable goal. Failing to act promptly could result in key roles remaining vacant or being occupied by individuals lacking the necessary comprehension of one of the most influential technologies shaping our era.

This article’s opinions belong solely to the writer; they may not align with those held by CoinDesk, Inc., its proprietors, or related entities.

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2025-01-18 00:33