US ethics body tells government employees to declare crypto holdings

The US Office of Government Ethics has issued an advisory, stating that executive branch employees should report their holdings of virtual currencies 

What has happened?

Anyone working for the executive branch of the US government must disclose their cryptocurrency holdings, because they "may create a conflict of interest".

What does this mean?

In a legal advisory, the US Office of Government Ethics (OGE) has said that virtual currency is "property held… for investment or the production of income" and that it does not consider it as a "real" currency or legal tender.

The OGE has therefore required that executive branch employees report their holdings of virtual currencies on their public or confidential financial disclosure report, "subject to applicable reporting thresholds for property held for investment or the production of income".

The requirement is not limited to virtual currencies, but also applies to other digital assets such as "coins" or "tokens".

"Further, the reporting and conflict of interest principles set forth herein apply equally to other digital assets, such as 'coins' or 'tokens' received in connection with initial coin offerings or issued or distributed using distributed ledger or blockchain technology," the OGE wrote.

The move was prompted by concerns that a conflict of interest may arise for employees who own virtual currencies.

"Virtual currency is an investment asset and, like other property held for investment, it may create a conflict of interest for employees who own it... Agency ethics officials should therefore analyze whether their employees’ official duties would have an effect on the value of their virtual currency, just as they would any other property held for investment or the production of income."

The OGE indicated that the guidance was issued as government "employees who hold virtual currencies are increasingly seeking guidance from their ethics officials concerning their financial disclosure reporting obligations".

Noting that the advice was not comprehensive, the OGE added this may not be the end of the matter as further guidance may be issued in the future "as the nature of virtual currency becomes better defined".

"Given the evolving nature of virtual currency, other regulatory agencies may issue additional findings or guidance that provide further insight into how these assets should be treated for the purposes of the EIGA," the OGE said.

In February, US congressman Jared Polis submitted a petition, asking for guidance for members of Congress on how to disclose virtual currency holdings.

Next steps

If you want to take advantage of blockchain's huge potential and disruptive impact, while avoiding falling foul of ever-developing regulatory and legal requirements, visit our Hogan Lovells Engage Blockchain Toolkit.

Contacts
Gregory Lisa
Partner
Washington D.C.

 

© 2020 Hogan Lovells. All rights reserved. "Hogan Lovells" or the “firm” refers to the international legal practice that comprises Hogan Lovells International LLP,Hogan Lovells US LLP and their affiliated businesses, each of which is a separate legal entity. Attorney advertising. Prior results do not guarantee a similar outcome.