Robert Schmidt reports that bitcoin futures regulator CFTC now allows “workers [to] trade digital tokens as long as they don’t buy them on margin or have inside information gleaned from their jobs,” though futures products of a similar nature are prohibited.
Last December, the CFTC welcomed bitcoin futures market makers such as Chicago Board Options Exchange (Cboe) and Chicago Mercantile Exchange (CME) to begin the groundbreaking process of introducing the world’s most popular cryptocurrency, bitcoin, to mainstream investors.
Mr. Schmidt sources CFTC’s Daniel J. Davis, appointed last Spring by Chairman J. Christopher Giancarlo. At his ascension to the CFTC General Counsel position, Mr. Davis reminded “Congress has entrusted the Commission with key responsibilities and I intend to assist the Commission with the various legal issues it must address in fulfilling those responsibilities.” A memo by Mr. Davis mere weeks ago reportedly addressed “numerous inquiries” from employees about their ability to dabble in cryptocurrencies.
Mr. Giancarlo around the same time became something of a folk hero within the ecosystem for his feeling responses at, of all places, a US Senate Committee on Banking public hearing. He was paired with his compadre bigwig of the SEC, but it was Mr. Giancarlo who stole the show, asking lawmakers take into consideration the next generation’s affinity for decentralized currency. Evidently that view flows to those under his employ.
Bloomberg quotes St. Mary’s School of Law professor Angela Walch as finding the whole idea “actually mind-boggling that they are allowing investing in this at all. It could absolutely skew their regulatory decisions.” The Chairman’s spokeswoman, however, clarified, “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.”
Mr. Davis’ memorandum to CFTC employees is reported to read as, “In this environment, the situation is ripe for the public to question the personal ethics of employees engaging in cryptocurrency transactions. 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.”
Interestingly, Mr. Schmidt notes, “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.”
Whatever the case, it goes to the broader issue of a major importance in politics: optics. It does look bad to have regulators eating at the same table they oversee. On the other hand, it might give individual financial cops better insight into the nature of these markets and the productive power of cryptocurrency in general.