The incoming administration faces a significant hurdle in shaping digital asset policy: a restrictive ethics rule that effectively bars individuals holding cryptocurrencies, tokens, or stablecoins from federal service. Legal Advisory 22-04, issued by the Office of Government Ethics in 2022, presents a challenge to recruiting experts in a rapidly evolving financial landscape.
This advisory compels potential appointees and civil servants to choose between divesting from the digital asset sector entirely or forgoing public service. This creates a critical gap in expertise within key agencies like the Treasury, SEC, CFTC, and the Federal Reserve, hindering the development of sound policy.
The disparity between regulations for traditional and digital assets is stark. A Treasury official can hold investments in established financial institutions while working on banking policy, yet holding any amount of Bitcoin while working on digital asset regulation is prohibited. Similarly, SEC lawyers can own mutual funds while reviewing securities cases, but holding even a small amount of stablecoins is disallowed. This discrepancy creates an artificial barrier to entry for experts precisely when their knowledge is most crucial.
The Blockchain Association, representing over 100 member companies at the forefront of financial innovation, highlights the significant impact of this rule. Numerous professionals with extensive government experience and invaluable insights are effectively excluded from contributing to federal service due to their involvement in the digital asset industry.
A practical solution is readily available: The Office of Government Ethics should amend its guidance to permit de minimis holdings of digital assets, aligning with existing rules for traditional financial instruments. This modification would uphold ethical standards while enabling access to essential expertise. Alternatively, the incoming administration could rescind the advisory through an executive order, signaling a more balanced approach to crypto policy.
The global landscape underscores the urgency of this issue. As nations like Singapore, Switzerland, and the UAE actively establish clear regulatory frameworks for digital assets, the U.S. risks falling behind. Maintaining an overly restrictive ethics rule not only hampers federal agencies but also undermines America’s leadership in financial innovation.
Addressing this barrier should be a prioritized objective for the incoming administration. Failure to do so could result in critical positions remaining unfilled or being occupied by individuals lacking a comprehensive understanding of one of the most transformative technologies of our time. The ability to attract and retain talent with expertise in digital assets is crucial for effective governance and maintaining America’s competitive edge in the global economy.
