To guard against insider trading and financial conflicts, members of Congress and federal officials must file regular reports on their assets – including stocks, bonds and derivatives.
Yet there’s no explicit mention in the disclosure requirements about bitcoin and the other cryptocurrencies that are drawing intense interest from investors and confounding regulators worldwide.
It’s a grey area that highlights how digital currencies have left governments racing to catch up with rapid changes in finance. It’s also one that’s generating concern from ethics specialists as lawmakers and US agencies weigh how to regulate the emerging market.
“Whether a member of Congress has holdings of bitcoin is relevant to our understanding of where someone’s interests might lie,” said Alex Howard, deputy director of the Sunlight Foundation, an advocacy group for government transparency.
The result is an informal arrangement on disclosure. Bitcoin isn’t yet listed in the rules given to members of Congress and federal officials. But when lawmakers and officials seek the counsel of the Office of Government Ethics, which governs executive branch employees, or congressional ethics committees, they’re being advised to disclose bitcoin holdings of more than $1,000, according to congressional aides and officials.
Representative Louise Slaughter, who sponsored a 2012 law called the Stock Act, which requires disclosure of trades in assets including stocks, bonds and derivatives, said she believes the law as written also applies to bitcoin. Still, she advocates rewriting rules to make it explicit.
The Stock Act was written “so the public could trust that members of Congress weren’t personally profiting from the office they hold,” Slaughter, a New York Democrat, said in a statement. “No one should be able to get around this law, including members who invest in digital currencies.”
Part of the initial appeal of bitcoin was the idea it could replace cash, granting users anonymity and freedom from government interference to make everyday transactions. As its price has risen, bitcoin and similar cryptocurrencies are being hoarded as investments.
The US government has already grappled with how to apply money laundering and tax statutes to bitcoin and lawmakers and officials could act this year.
Officials around the world are examining broader questions of how to police bitcoin. European governments are seeking global bitcoin regulation amid mounting alarm that it’s being used by money launderers, drug traffickers and terrorists.
The US Congress is looking to address the legal framework for cryptocurrency. The 11-member Congressional Blockchain Caucus was formed last year “to help policy makers implement smart regulatory approaches to the issues raised by blockchain-based technologies and networks,” according to the group’s website.
Caucus chairmen Jared Polis, a Colorado Democrat, and David Schweikert, an Arizona Republican, in September introduced the Cryptocurrency Tax Fairness Act of 2017.
It would exempt bitcoin transactions of less than $600 from tax reporting requirements. The bill, which the House declined to add as an amendment to tax overhaul legislation that passed in December, is designed to ease bitcoin’s use as a currency, something that would tend to increase its value.
Schweikert and Polis don’t have any holdings in bitcoin, according to spokeswomen for both lawmakers. Ashley Sylvester, a spokeswoman for Schweikert, said in an email that the “decision was purposeful because he had an interest in the regulatory sphere of bitcoin and thought it would be inappropriate to invest.”
Polis, one of the wealthiest members of Congress and a venture capitalist, said he plans to start a discussion with the Securities and Exchange Commission about an effective rule to make sure members of Congress and their top staff report cryptocurrency holdings.
“Members of Congress should absolutely be required to disclose their bitcoin holdings, as to avoid any conflict of interests,” Polis said. “The public deserves transparency.”
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