Key Takeaways
- Paul Grewal called on the U.S. Office of Government Ethics (OGE) to rescind an advisory that currently bars SEC staff from investing in or interacting with digital assets
- Grewal suggested that the SEC could take interim steps by issuing waivers
Coinbase is urging a major policy shift that could allow employees of the U.S. Securities and Exchange Commission (SEC) to hold and use crypto.
In a pair of open letters shared on X on April 25, Coinbase Chief Legal Officer Paul Grewal called on the U.S. Office of Government Ethics (OGE) to rescind an advisory that currently bars SEC staff from investing in or interacting with digital assets. The letters were addressed to OGE Acting Director Jamieson Greer and newly appointed SEC Chair Paul Atkins.
“To regulate technology, you need to understand it. To understand technology, you need to use it,” Grewal wrote in his letter to Greer, arguing that firsthand experience with crypto assets is essential for regulators tasked with overseeing the digital asset industry. He contended that allowing SEC employees to engage directly with cryptocurrencies would foster the deeper understanding needed to craft effective regulations.
The restriction Grewal seeks to overturn stems from Legal Advisory 22-04, issued by the OGE on July 4, 2022. That advisory prohibits SEC personnel from buying, selling, or using cryptocurrencies and stablecoins, categorizing them as non-publicly traded securities and placing them outside the exemptions granted for traditional investments like stocks.
Although only the OGE can formally rescind the advisory, Grewal suggested that the SEC could take interim steps by issuing waivers. “Issuing waivers to crypto task force members and other staff actively working on task force matters would be consistent with measures already taken in commensurate advisory situations,” he wrote.
A waiver would allow SEC personnel engaged in crypto policymaking to interact with digital assets without breaching ethics rules, giving them vital technical insight.
In a second letter addressed to Atkins and SEC Commissioner Hester Peirce, Grewal emphasized the particular challenge facing the SEC’s Crypto Task Force. He argued that members of the task force cannot effectively perform their duties without basic, practical exposure to blockchain technology.
He pointed out that under directives issued during the Trump administration, agencies like the SEC are required to update their crypto regulation recommendations within a 90-day window. Grewal stated that nearly half that period has already passed, yet key staff remain unable to work directly with the tech they are expected to regulate.
Grewal criticized the current blanket prohibition as outdated and ill-suited to the complexities of the modern digital economy. He proposed a more nuanced approach, suggesting that the SEC could permit employees to own certain cryptocurrency assets under controlled conditions that mitigate conflicts of interest.
Grewal argued that most cryptocurrency activities do not involve securities and that the existing broad prohibition unfairly handicaps staff working on cryptocurrency regulation. He suggested the Commission could clarify that limited holdings would not constitute a direct and predictable effect on asset prices, thereby removing unnecessary barriers.
He also noted that offering waivers or exemptions would align with views expressed by the Office of the Inspector General, which has stressed the importance of regulators maintaining adaptive expertise and oversight tools in a rapidly evolving market environment.
“Granting waivers to task force members would help bridge the gap between innovation and oversight,” Grewal wrote, adding that direct knowledge of blockchain ecosystems is critical for developing workable regulatory frameworks.
Coinbase is pushing for the OGE to rescind Legal Advisory 22-04 entirely. In the meantime, it proposes practical interim steps to allow SEC staff to engage with digital assets in a limited, ethical manner.
By doing so, Grewal argues, regulators would be better equipped to understand the technologies they are charged with supervising, adding that the broader public interest would be better served
