A group of Democratic lawmakers issued letters to several financial regulatory agencies in a bid to examine the growing trend of former public servants working for digital asset companies.
A bicameral group of legislators sent a series of letters to multiple financial regulatory agencies requesting more oversight of the burgeoning revolving door between public service and the cryptocurrency industry.
Cosigned 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 leadership at agencies including the U.S. Securities Exchange Commission and Treasury Department.
In the letters, lawmakers spotlight the large volume of former federal employees that have taken jobs within the cryptocurrency industry. They link this trend to the rise in lobbying efforts on behalf of cryptocurrency companies, raising concerns over how financial institutions enact regulatory policy.
“Americans should be able to trust that financial rules are crafted to reduce risk, improve security and ensure the fair and efficient functioning of the market,” the letters read. “Americans should be confident that regulators are working on behalf of the public, rather than auditioning for a high-paid lobbying job upon leaving government service. The rapidly spinning 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 previously working in the White House, Congress and regulatory bodies accepted positions in cryptocurrency companies.
This includes two former SEC chairs, 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 on financial regulatory agencies’ ethics procedures, including how long employees must wait before working for an industry they oversaw as federal employees, challenges each agency faces when developing integrity guidelines for employees and conflict of interest policies and procedures.
The deadline for each agency to reply is Nov. 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 services sector—and we are concerned that the crypto revolving door risks corrupting the policymaking process and undermining the public’s trust in our financial regulators,” the letters say.
The Federal Deposit Insurance Corporation confirmed to Nextgov that they will be responding directly to the authors of the letter.
A spokesperson for the Consumer Financial Protection Bureau said the agency “received the letter and are reviewing it.”
In 2021, the CFPB acknowledged the ethical problems with the revolving door phenomenon, noting that former employees who exploit confidential government information may be in violation of the law. It launched a set of ethical guidelines for CFPB employees to reference and encouraged them to report suspicious communication activity within the organization.
“This guidance is the first step of several that the CFPB will undertake to further strengthen the Bureau's Ethics Program, demonstrate the Bureau's commitment to a standard of exemplary integrity, and ensure that our work serves the American people first and foremost,” the agency wrote.
A Treasury spokesperson also told Nextgov that current Treasury employees who are looking for work outside of the agency are subject to certain recusal obligations, and “must disqualify themselves” from any government work that is of interest to a prospective employer.
“Treasury employees are held to high ethical standards to guard against conflicts of interest,” the spokesperson said. “In addition, there are restrictions that apply to Treasury employees after they leave federal employment. Senior employees, for instance, are subject to a one-year cooling-off period following their federal employment.”
The SEC declined to comment.
Cryptocurrency companies have been the regulatory target of the current administration following President Joe Biden’s executive order to research how the digital asset market stands to impact the U.S. economy.