Trump Appointees Can’t Own Crypto. That Rule Doesn’t Apply to Trump Himself. #CriptoNews

When Tulsi Gabbard filed ethics paperwork to serve as Donald Trump’s director of national intelligence, she promised to sell her holdings of bitcoin, Cronos, Ethereum, and Solana cryptocurrencies. For decades, such pledges have been a routine part of the standard government hiring process. Congress passed a law in 1962 criminalizing conflicts of interest, and the Office of Government Ethics singled out cryptocurrencies as a concern in 2022.

But the ethics rules restricting the members of his administration who could sway the price of crypto don’t apply to President Donald Trump.

Before his inauguration, Trump cashed in on his election win with a meme coin, signaling the beginning of a new era as crypto companies push the government to allow financial regulators to get in on crypto trading themselves.

Even if that does not come to pass, one ethics watchdog said he already had grave concerns about Trump selling meme coins at the same time that he appoints the heads of the Securities and Exchange Commission and Commodity Futures Trading Commission.

“If you’ve got a direct, personal financial connection to the crypto industries, there’s a self-interested motivation to create the easiest possible path for the crypto world,” said Dylan Hedtler-Gaudette, the director of government affairs at the Project on Government Oversight.

Coins for Me but Not for Thee

Trump has won legions of fans in the crypto world by promising to create industry-friendly regulations. After months of watching scammers make money off rumors that one coin or another was official Trump product, Trump himself got into the game two days before the inauguration.

Legal disclaimers for what is branded as a “meme card” stipulate that it is “not intended to be” used as an investment opportunity, but punters have snapped up enough of $TRUMP to give it a nominal market capitalization above $5 billion as of Monday.

Trump’s business group, the Trump Organization, is affiliated with the company that launched the token. That company and another have retained an 80 percent stake in the token, meaning they could sell off more of it in the future. It’s unclear how much Trump himself owns, Forbes has reported.

His entry into the crypto world earlier this month was so brazen that it alarmed even his fanboys in Silicon Valley, who worried that it might tarnish the entire industry. One investor called the move “very grifty and cheap.”

For many government employees, however, merely owning — let alone creating — a new cryptocurrency would be out of bounds.

In 2022, the Office of Government Ethics released an opinion warning officials that crypto posed a potential conflict of interest. The bulletin advised that owning crypto could violate a federal criminal law if the official in question oversees a matter “when there is a real possibility that the matter will result in a gain or loss to the employee’s digital assets.”

Kathleen Clark, a professor at the Washington University in St. Louis law school, said that advice was a clear-cut application of federals ethics law.

Luckily for Trump, the law does not apply to him. Congress granted presidents an exception in the 1980s at the urging of George H.W. Bush’s White House counsel, C. Boyden Gray.

“We should expect presidents to be at least as ethical as the lowliest executive branch official. But thanks to Boyden Gray, we no longer have that statutory requirement imposed on presidents or vice presidents,” Clark said.

The law also does not apply to members of Congress, who set and enforce their own ethics rules. At present, members are allowed to trade crypto, although few of them do.

In response to Trump’s new venture, one crypto-friendly Democrat has proposed creating a clear-cut rule for elected officials across the board.

“Elected officials must be barred from having meme coins by law,” Rep. Ro Khanna, D-Calif., said on X.

Cracking Open the Door

As Trump takes the reins, the crypto industry is pushing an agenda that includes shifting regulatory oversight from the SEC to the more thinly-staffed and industry-friendly CFTC, as well as loosening the rules that prevent big banks from holding digital assets.

More recently, the industry is calling for a shift in the application of ethics laws. At present, government officials are barred from holding a cryptocurrency if their official duties include overseeing it. That grates on crypto industry figures.

“Imagine designing an FAA safety protocol without ever seeing a plane, or legislating lightbulb efficiency without ever flipping a switch. It may be possible, but it certainly won’t yield sensible policy,” employees of the crypto investment firm Paradigm wrote in a 2023 blog post.

After Trump’s victory in November, the D.C.-based industry group the Digital Chamber wrote a letter to the Office of Government Ethics asking for an exception allowing regulators to maintain “minor” crypto holdings, “limited to a threshold that poses no risk of conflict of interest.”

The industry has compared such a “de minimis” exception to current rules that might allow government officials to hold small amounts of stock in a particular company.

Clark, the professor who studies ethics law, said the industry’s arguments were flawed. Allowing government officials to dabble in crypto, she said, would make them both “more informed and more biased.”

The crypto industry was also overlooking a key difference between digital assets — many of which still operate in a Wild West world outside the reach of regulators — and publicly traded stocks overseen by the SEC.

“Digital assets, they can be junk. I suppose publicly traded companies could be junk, but there is a much greater risk, it seems to me, of pump-and-dump schemes,” Clark said. “OGE is drawing a distinction between digital assets and publicly traded companies. One of those things is not like the other. One of them has actual value.”