Coinbase CLO Paul Grewal has called on the Office of Government Ethics (OGE) to update its legal advisory on Securities and Exchange Commission staff holding cryptocurrencies. The existing rule bars SEC staff from buying, holding, or using crypto,
According to a letter dated April 22 and directed to Jamieson Greer, the Acting Director of the US Office of Government Ethics, Grewal stated that the restriction on SEC staff from holding crypto needs to end.
He noted that the SEC staff are currently working on regulatory proposals for the digital asset sector based on the executive order of the president. Yet, they are unable to use the technology that they plan to regulate. Grewal believes that this must change immediately.
He said:
“This needs to change. To regulate technology, you need to understand it. To understand technology, you need to use it.”
He therefore requested that the OGE rescind and update its legal advisory 22-04, which prohibits SEC staff from buying, using, and holding crypto assets. Grewal added that granting that permission is essential for the regulator to have the knowledge required to propose the right regulatory framework for the industry.
Meanwhile, the Coinbase CLO added that the prohibition is unnecessary because most cryptocurrencies are not even securities. He noted:
“The technology itself is not a security and securities regulators’ engagements with the technology does not inherently entail conflicts or concerns.”
Thus, he believes the restrictions do not do any good and will only limit regulatory progress and development.
Grewal wants waivers for SEC staff working on crypto regulation
Grewal also wrote to the SEC’s new chair, Paul Atkins, to request that the commission take temporary steps to enable members of the Crypto Task Force to hold cryptocurrency.
In the letter addressed to Atkins, he acknowledged that only the OGE can rescind the legal advisory. However, Grewal believed that the SEC could issue waivers to members of its task force and other staff currently working on digital assets regulations.
According to him, similar waivers have been granted in other advisory situations, so this one would not be surprising or out of order.
He added:
“This would allow Commission Staff who are most directly responsible for implementing a workable regulatory framework to directly use and evaluate the underlying digital asset technology.”
Still, Grewal insisted that it is essential to eliminate the restriction altogether and that SEC staff should be allowed to hold cryptocurrency assets if they are not involved in matters involving such assets.
Recent moves suggest OGE may rescind the rule
He suggested that the SEC can limit holdings to major assets and stablecoins and stipulate a threshold for the value of crypto assets that staff can hold. This, he said, aligns with the view of the Office of the Inspector General on what the financial watchdog needs to do to be an effective regulator for the industry.
Meanwhile, many people agree that the blanket restriction on staff holding crypto is an overreach. As President of Crypto Council for Innovation, Ji Kim, pointed out, it is similar to the Federal Reserve prohibiting its staff from holding dollars because they work on monetary policy.
However, those who support the restriction believe that it will prevent conflict of interest, potential insider trading, and other ethical risks. Still, everyone agrees that staff regulating a technology need to be familiar with it.
It would not be surprising to see the OGE rescind the rule, given how other federal regulators have also been discarding their anti-crypto guidance. The latest to do that is the Federal Reserve, which recently withdrew its guidance that required US banks to obtain regulatory approval before engaging in crypto activities.
The new SEC chair has also hinted at the possibility of the agency passing policies on crypto-related matters while waiting for Congress to regulate the industry. He had earlier said that his administration would focus on providing a solid regulatory framework for the digital assets sector.
Cryptopolitan Academy: Coming Soon – A New Way to Earn Passive Income with DeFi in 2025. Learn More
