The U.S.’s main commodities regulator recently told its employees that they are allowed to invest in cryptocurrencies, a determination that came weeks after the agency began overseeing Bitcoin futures.
Under the Commodity Futures Trading Commission’s ethics guidance, workers can trade digital tokens as long as they don’t buy them on margin or have inside information gleaned from their jobs. Investing in the Bitcoin futures that the CFTC polices, however, is barred.
While it’s not known how many people at the CFTC are actively trading the products, the agency’s general counsel, Daniel Davis, told employees in a Feb. 5 memo that the guidelines were being issued after the commission’s ethics office had received “numerous inquiries” about whether the investments were permissible.
The CFTC’s ruling comes at a time when federal agencies are debating whether and how to impose rules on the nascent products that have rapidly become a global investment craze. A number of officials have been wary of putting a government stamp of approval on cryptocurrencies, raising concerns about their wild price swings, their use in illicit transactions and the frequency with which they’ve been hacked and stolen.
Mind-boggling Decision
“This is actually mind-boggling that they are allowing investing in this at all,” said Angela Walch, an associate professor who specializes in digital money and financial stability at St. Mary’s University School of Law. “It could absolutely skew their regulatory decisions.”
Erica Richardson, a spokeswoman for CFTC Chairman J. Christopher Giancarlo, said he was among those asking for the ethics guidance because he wants to make sure that agency employees dealing with virtual currency regulations or investigations aren’t investing in them.
“The chairman has made it clear that staff members who own Bitcoin should not participate in matters related to Bitcoin, as it presents a conflict of interest,” she said.
The CFTC has been ahead of the crypto frenzy, first declaring in 2014 that the digital currency was a commodity subject to the agency’s oversight. Still, that supervision has mostly consisted of enforcement actions to halt alleged frauds. Much of the trading for coins now takes place on lightly regulated exchanges or in foreign countries where the commission has little reach.
Oversight Forefront
That began to change late last year when Giancarlo allowed two major U.S. exchanges to offer Bitcoin futures -- a move that placed his agency at the forefront of crypto oversight. The decision concerned some other regulators who thought Giancarlo was moving too quickly, people familiar with the matter have said.
An enthusiastic promoter of technology who previously worked at a swaps brokerage, Giancarlo became an online folk hero for his seemingly supportive comments about cryptocurrencies at a congressional hearing this month. He gained thousands of Twitter followers and was the subject of a series of memes where he was called Bitcoin Jesus, crypto dad and even encouraged to run for president.