U.S. Federal Reserve Bans Officials from Trading Crypto, Stocks and Bonds

The U.S. central bank has adopted yet another hard stand for its officials announcing some sweeping restrictions in trading stocks and crypto. The Federal Open Market Committee, or FOMC has approved new rules banning all officials at the central bank from purchasing and holding digital assets and other assets like stocks, bonds.

In the last Friday meeting, the FOMC announced that starting on May 1, senior officials at the Federal Reserve have one year to “dispose of all impermissible holdings” while the new officials will get six months to do so.

In the meeting, the FOMC announced that senior Fed officials are “Prohibited from purchasing individual stocks or sector funds; holding investments in individual bonds, agency securities, cryptocurrencies, commodities, or foreign currencies; entering into derivatives contracts; and engaging in short sales or purchasing securities on margin”.

The rules further note that starting July 1, the purchasing and selling of securities shall be permitted with a 45-day window. Meaning the officials have to take prior approval as well as an agreement to hold on to the investment for at least a year.

Furthermore, officials have been prohibited from purchasing and selling during "periods of heightened financial market stress”. The announcement noted: “The Federal Reserve expects that additional staff will become subject to all or parts of these rules after the completion of further review and analysis”.

The FOMC had first introduced these rules last year in October 2021. It said that the change in rules was intended to “support public confidence in the impartiality and integrity of the Committee's work by guarding against even the appearance of any conflict of interest.” 

All eyes are currently on the executive order from the Joe Biden administration which will direct respective government agencies to study in detail the crypto market and create a comprehensive regulatory framework surrounding it.

Along with the regulatory framework surrounding crypto, the executive order will also the agencies to have a comprehensive study regarding the central bank digital currency (CBDC), aka Digital Dollar. The focus shall be on setting up the right infrastructure for supporting the Digital Dollar.

The Financial Stability Oversight Council (FSOC) would make sure to ensure the overall stability of the financial system along with the inclusion of digital assets.