US ethics advisory on federal employee’s crypto has basis in legislation

When the United States Office of Government Ethics (OGE) released its Legal Advisory 22-04 on July 5, most attention was given to its conclusion that federal employees who own any amount of cryptocurrency or stablecoins whatsoever may not participate in regulation and policymaking that concerns crypto. The legal advisory (LA) raised some eyebrows, as de minimis exemptions, threshold amounts below which assets holdings are permissible, are common in the government. The LA is more comprehensible when seen in a larger context.

What they were thinking

The OGE does not grant interviews, so it was fortunate that a video of OGE Senior Associate Counsel Christopher Swartz discussing the LA appeared on the office’s YouTube channel the day after Cointelegraph made an inquiry. Swartz discussed several points in detail, emphasized that the LA is an interpretation of current law to aid in its application to federal employees and “understand the law as it exists.” The OGE has no position on digital assets in general.

The OGE issued an advisory in 2018 on federal employees’ disclosure of crypto assets. In light of the growing adoption of cryptocurrency by the public and federal employees, Swartz explained:

“We realized it was now ripe for us to revisit this area, make sure we have established ground rules particularly as it relates to the conflicts of interest law, which is a criminal law.”

The law Swartz was referring to dates to 1962 and “prevents federal employees from participating in any particular matter in which they have a financial interest,” according to Swartz. It is intentionally broad and “agnostic” in regard to the details. There is no substantiality element in the law, that is, a de minimis exemption, to allow federal employees to hold small amounts of anything.

Related: US Congressional hearing on digital asset regulation focuses on disclosure

Under the law, the OGE has the authority to waive the conflict of interest laws for all employees or classes of employees when the financial interest is too remote to affect the expected services of the employees. Agencies can provide exemptions on a case-by-case basis in consultation with the OGE.

The OGE created some exemptions in 1996. Publicly traded equity in a company that engages in crypto services is already covered by an exemption, for example. The LA specifies that a registered mutual fund with exposure to crypto derivatives, such as futures, might have one of two exemptions: a per se…