02 Jan 2023
US Congress may ban stock and crypto trading by members
Most stock and cryptocurrency investments made by members of Congress must already be disclosed, but many have noted potential conflicts of interest.
The 118th Congress may take up this issue after a change in leadership. Many US lawmakers from both parties of the aisle have, at one point, supported legislation that would forbid members from investing in stocks or cryptocurrencies. Following the 2022 Midterm elections, Republicans will take control of the House of Representatives with a narrow majority beginning on Jan. 3, as the next session of the United States Congress convenes.
Democrats will continue to hold a majority in the Senate. In January 2022, Republican congressman Kevin McCarthy, vying to become the next speaker of the House, reportedly stated that should his party gain control of the chamber, he would consider an outright ban on lawmakers owning and trading stocks. This ban also applies to cryptocurrency. As of the time of publication, it is still being determined whether McCarthy has the support needed to take over as Speaker of the House, which is expected to happen on January 3.
The fact that elected officials are permitted to trade and hold particular assets while in office, however, has been cited by many as posing a conflict of interest.
The Stop Trading on Congressional Knowledge Act, or STOCK Act, first passed in 2012, alleges that 77 members of Congress broke the disclosure rules during the 117th Congress. Delayed reporting of permissible trades was one of these violations, but members were still allowed to vote on legislation that their investments might have influenced. For example, Senator Cynthia Lummis, a supporter of cryptocurrency who chairs the Senate Agriculture Committee and conducts hearings on the Commodity Futures Trading Commission, has revealed investments in Bitcoin that have been classified as commodities by the financial watchdog.
The ranking senator on the Senate Banking Committee, Pat Toomey, also previously disclosed buying bitcoin and ether, but he will retire in 2023.
Significant controversies in the cryptocurrency space in 2022 focused on the financial connections between American lawmakers and business leaders. FTX executives, including former CEO Sam Bankman-Fried, donated to political causes and campaigns for Republicans and Democrats. As a result, many in the industry questioned the objectivity of lawmakers during hearings intended to look into the company's collapse.
As a result, the STOCK Act should be amended to forbid members of Congress, the Supreme Court, as well as their spouses and dependent children, from “trading stock or holding investments in securities, commodities, futures, cryptocurrency, and other similar investments,” according to Zoe Lofgren, chair of the Committee on House Administration. In 2022, the proposed policy change remained unaltered, but the Federal Open Market Committee approved similar regulations prohibiting senior Federal Reserve officials from owning and purchasing cryptocurrencies.
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