The SEC is having a world of trouble hiring crypto experts… largely because of an outdated rule that requires employees to sell all of their crypto.
What happened: This week, the Office of the Inspector General (OIG) released an annual report summarizing the most serious management and performance challenges facing the agency.
To no surprise, crypto was highlighted in the report more than once. Like in years past, the SEC has been open and honest about its challenge to regulate the complex and rapidly evolving crypto industry.
And we don’t blame them: Despite the regulator's historical lack of clarity and borderline unlawful practices toward domestic crypto innovators, one may still argue that it’s a tough job to begin with. Understanding, let alone overseeing, the dynamic world of cryptocurrencies and all its tentacles is no easy layup.
This especially holds true if your workforce lacks expertise. And that’s exactly what the SEC is dealing with. As highlighted in the report, specialized recruitment is one of the biggest headwinds for the agency.
And now we have a better understanding as to why…
Details: In a section labeled Specialized Recruitment Challenges, the OIG highlighted that while the agency aims to hire qualified crypto experts with a deeper knowledge of the market, one rule often deters them: If you want to work for the SEC’s crypto unit, you can’t own crypto.
In other words, candidates are unwilling to divest their crypto assets to come work for the SEC.
Why it matters: This situation leads to a glaring implication for crypto enthusiasts who have been simply asking for fair policies and regulation over the years. Given this rule, it’s easy to assume that the SEC is staffed by people who disown, or perhaps, even dislike crypto. Those with "crypto expertise" and a willingness to relinquish 100% of their crypto holdings could tend to be deep-seated skeptics.
This rule likely reinforces strong bias in the hiring process and it may shed light on why the SEC has adopted a consistently critical stance toward crypto.
Our take: The SEC has definitely wedged themselves into a sticky situation. If you were to compare the restrictions for SEC employees around stock ownership, their rules here on crypto aren’t that far off. Rightfully so, the SEC does not want anyone working for them to be personally incentivized. We don’t either. So, we’re not so sure this SEC ruling is actually wrong per se. But we do agree that it may lead to a staffing imbalance.
Why can’t the SEC put in place lockout periods for employees, as they do for stocks? Why can’t employees hold onto their bitcoin if they’re just investigating altcoins? Are the roles of the employees to protect investors or to protect the dollar?
These are questions that we don’t have answers to. At the end of the day, it all probably comes down to what is a security and what isn’t.
Unfortunately the agency’s lack of clarity is not only hurting crypto investors, but also indirectly hurting themselves in their efforts to find the talent they need.
