- Banning SEC Staff Holding Crypto in Focus as Coinbase Aims to Raise It to Enhance Regulation
- 2022 OGE rule prevents SEC employees from holding crypto, slowing progress.
- Grewal suggests waivers for SEC’s Crypto Task Force to hold crypto.
Coinbase wants to change the rule that banning SEC staff from holding or investing in cryptocurrencies. The firm’s top legal officer, Paul Grewal, sent letters to the US Office of Government Ethics (OGE) and incoming SEC Chair, Paul Atkins, requesting them to lift this ban.
The regulation, which is called Legal Advisory 22-04, was issued by the OGE in July 2022 and bars SEC employees from holding or trading cryptocurrencies and stablecoins since they are not publicly traded securities such as stocks.
Why Banning SEC Staff Harms Regulation
Grewal feels that banning SEC staff form crypto makes it more difficult for them to learn about the technology. He states that if you’re going to regulate something effectively, you must learn how it functions, and the easiest way to learn is by operating it.
He maintains that permitting SEC workers to own crypto would enable them to acquire the knowledge necessary to establish equitable and effective regulations for digital assets. This is particularly relevant now, as President Donald Trump has instructed the SEC and other bodies to recommend crypto regulations in a few months.
SEC’s Crypto Task Force Faces Challenges
In his letter to Atkins, Grewal explained that prohibiting SEC employees from holding crypto is an issue for the SEC’s Crypto Task Force, a group responsible for drafting crypto regulations. He had proposed that the SEC could grant waivers, which would allow some staff to use crypto without being in violation of rules.
This would enable them to research the technology and provide improved recommendations. Grewal added that the OGE must rescind the rule in full but that the SEC can act separately to correct the matter.
Banning SEC staff from holding cryptocurrency has existed since 2022, and Grewal referred to it as outdated and unfavourable to making progress in regulating the cryptocurrencies. He noted that the majority of crypto trading is not related to securities, thus the ban on their activity is unncessary.
He also cited that the SEC recently dismissed a number of lawsuits filed against crypto firms like Coinbase, which indicated a change in the way the agency perceives crypto.
Grewal stressed that banning SEC staff from crypto use would delay the government in making clear regulations to the sector. Since the time to make recommendations on crypto regulations by Trump is running out, he thinks the SEC should move with speed.
By permitting employees to use and learn about crypto, the agency will come up with improved policies to assist innovation as it guards against investors. Coinbase hopes its letters will convince the OGE and SEC to rethink the rule and make it easier for staff to engage with the technology they are tasked with regulating.
Also Read: Senator Lummis Says Fed’s Crypto Banking Rule Withdrawal Is ‘Not Real Progress’
