(In one sign of the potential pitfalls, however, Giancarlo’s Twitter handle was mimicked by an impostor shortly after his testimony. Accounts with his picture popped up asking for donations of Bitcoin to “support movement.” Giancarlo later tweeted that “NO ONE” should send him any money.)
The guidance on trading digital currencies was based on the CFTC’s standard ethics rules, which allow investments in physical commodities. That’s because the agency doesn’t regulate markets where corn or oil, for example, are bought and sold. Instead, it regulates futures contracts derived from oil or corn prices.
‘Employees’ Ethics’
In his memo, Davis, the CFTC’s chief lawyer, wrote that because the agency has determined digital tokens are a commodity, workers can trade them like they would any other commodity.
The guidance does note that staff members shouldn’t invest if they have nonpublic information that could impact the trade. That could potentially arise if they are handling an enforcement case, conducting surveillance or working on a regulation involving digital tokens.
Davis also said that employees need to ask if the transaction would cause “a reasonable person” with all the facts to question their ethics.
“In this environment, the situation is ripe for the public to question the personal ethics of employees engaging in cryptocurrency transactions,” Davis wrote. “Please keep in mind that you must endeavor to avoid any actions creating the appearance that you are violating the law or government and commission ethical standards.”
SEC’s Policies
The Securities and Exchange Commission also allows its workers to invest in digital currencies, with some exceptions similar to the CFTC. However, the SEC has less responsibility for overseeing the crypto markets.
The SEC’s jurisdiction right now is largely limited to so-called initial coin offerings, where companies raise money by selling tokens. The agency’s employees cannot invest in those until seven days after the ICO, according to a memo its ethics counsel issued in January. The SEC also requires its staff to pre-clear all their digital currency trades -- a requirement that the CFTC doesn’t have.
Attorneys specializing in government ethics were split on whether CFTC employees should be allowed to trade the products.
There is no government-wide policy on the investments and each agency has to set its own rules. That task is made harder because digital currencies are relatively new and there isn’t broad agreement about how they should be classified.