As federal agencies gear up for new leadership, an obscure ethics rule poses a significant hurdle to the new administration’s ability to craft effective digital asset policies. Legal Advisory 22-04, issued by the Office of Government Ethics in 2022, has largely gone unnoticed amid the Biden administration’s stringent approach to cryptocurrency. However, its ramifications might be substantial: it effectively excludes anyone with cryptocurrency holdings from federal roles.
For an administration that aims to enhance American competitiveness in financial innovation, this presents an urgent issue. Essential institutions like the Treasury, SEC, CFTC, and the Federal Reserve require officials knowledgeable in both traditional finance and digital assets. Yet current ethics policies force potential appointees into a dire dilemma: either divest from the sector or forgo public service entirely.
The irony cannot be ignored. A Treasury official may invest in JP Morgan while shaping banking policy, yet they are barred from owning even a modest amount of Bitcoin when regulating digital assets. Similarly, an SEC attorney can possess mutual funds while evaluating securities cases but is prohibited from holding $100 in stablecoins. This establishes a false barrier to attracting expertise exactly when it is needed most.
As the Senior Director of Industry Affairs at the Blockchain Association, I collaborate with over 100 pioneering member companies in financial innovation. Many of our members are former government officials who could lend invaluable insights to federal service. However, under existing regulations, they are effectively barred from participation unless they divest from the industry they best understand.
A straightforward fix exists: The Office of Government Ethics could adjust its guidance to permit minimal holdings of digital assets, analogous to current rules around traditional financial instruments. This modification would uphold ethical standards while enabling access to much-needed expertise. Alternatively, the incoming administration could swiftly repeal the advisory via executive order, signaling a more moderate approach to cryptocurrency policy.
The stakes are considerable. As nations like Singapore, Switzerland, and the UAE strive to establish transparent regulatory frameworks for digital assets, the U.S. requires officials who comprehend both the risks and opportunities at stake. Maintaining a broad ethics rule not only weakens agencies; it jeopardizes America’s capacity to take the lead in financial innovation.
For an incoming administration focused on triaging effective governance and restoring U.S. leadership in technology, resolving this obstacle should be a primary focus. The alternative is allowing crucial positions to remain vacant or worse, filled by individuals with limited understanding of one of the most transformative technologies of our era.
