Lawmakers question revolving door between government and crypto industry

A bicameral group of lawmakers sent a series of letters to several financial regulatory agencies asking for more oversight of the growing revolving door between public service and the cryptocurrency industry.

Co-signed by Sens. Elizabeth Warren, D-Mass., and Sheldon Whitehouse, D-R.I., along with Reps. Rashida Tlaib, D-Mich., Alexandria Ocasio-Cortez, D-N.Y., and Jesús García, D-Ill., the letters were sent to the leadership of agencies including the US Securities Exchange Commission and the Treasury Department.

In the letters, lawmakers spotlight the large volume of former federal employees who have taken jobs in the cryptocurrency industry. They link this trend to the rise in lobbying on behalf of cryptocurrency companies, raising concerns about how financial institutions adopt regulatory policies.

“Americans should be able to trust that financial rules are designed to reduce risk, improve safety and ensure the fair and efficient functioning of markets,” the letters state. “Americans should be confident that regulators are working on behalf of the public, rather than auditioning for a high-paying lobbying job when they leave public service. The rapidly revolving door out of government and into the crypto sector undermines both imperatives.”

Citing data from the Tech Transparency Project, lawmakers noted that over 200 former officials who previously worked in the White House, Congress and regulatory agencies accepted positions in cryptocurrency companies.

This includes two former SEC heads, 31 former Treasury officials and three from the Consumer Financial Protection Bureau, among others.

In response to this hiring trend, lawmakers are asking for detailed information about financial regulatory agencies’ ethics procedures, including how long employees must wait before working for an industry they oversee as federal employees, challenges each agency faces when developing employee integrity policies and conflicts of interest . interest policy and procedures.

The response deadline for each agency is November 7.

“We have long been aware of the revolving door in other sectors of the economy – from Big Tech, to the defense industry, to other parts of the financial sector – and we are concerned that the crypto revolving door risks destroying policymaking and undermining public confidence in our financial regulators,” it says in the letters.

Federal Deposit Insurance Corporation confirmed to Nextgov that they will respond directly to the authors of the letter.

A spokesperson for the Consumer Financial Protection Bureau said the agency “received the letter and is reviewing it.”

In 2021, the CFPB acknowledged the ethical issues with the revolving door phenomenon, noting that former employees exploiting confidential government information may be in violation of the law. It launched a set of ethics guidelines for CFPB staff to refer to and encouraged them to report suspicious communications activity within the organization.

“This guidance is the first of several steps the CFPB will take to further strengthen the agency’s ethics program, demonstrate the agency’s commitment to a standard of exemplary integrity, and ensure that our work serves the American people first and foremost,” the agency wrote. .

A spokesman for the Ministry of Finance also said so Nextgov that current Treasury employees seeking employment outside the agency are subject to certain non-agency obligations, and “must disqualify themselves” from any government work of interest to a prospective employer.

“Treasury staff are held to high ethical standards to protect against conflicts of interest,” the spokesperson said. “Additionally, there are restrictions that apply to Treasury Department employees after they leave federal employment. Senior employees, for example, are subject to a one-year cooling-off period after their federal employment.”

The SEC declined to comment.

Cryptocurrency companies have been the regulatory target of the current administration following President Joe Biden’s order to investigate how the digital asset market could affect the US economy.