The Federal Open Market Committee, or FOMC, has approved rules that would ban senior officials at the Federal Reserve from purchasing and holding cryptocurrencies and other investments.
Senior officials at the central bank will not be allowed to purchase individual stocks or sector funds, and will be prohibited from holding individual bonds. The rules were expanded to cover cryptocurrencies, commodities, foreign currencies, derivatives contracts, short sales, and purchases on margin.
The restrictions will apply to other central bank staff who have close dealings in monetary policy decisions. The rules were intended to “support public confidence”, by guarding against even the appearance of any conflict of interest.” Their spouses and children will also be subject to the new rules.
“We do take the need to protect our credibility with the public very seriously, and I think our new system is easily the toughest in government and the toughest I’ve seen anywhere,” Powell told Congress in January.
In the fall of last year, Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren made substantial stock trades and real estate investment trust transactions respectively during 2020. Both individual stepped down from their respected positions.
Any existing securities holdings in conflict with the new policy must be divested within 12 months of the new rules taking effect (on May 1, 2022).
If policymakers want to make any purchases or sales of any permitted securities, they would now be required to provide 45 days of advance notice and obtain prior approval. Those officials will also be required to hold onto those investments for at least one year, with no purchases or sales allowed during periods of “heightened financial market stress.”
The Fed also commented saying, “any cleared securities transactions will be publicly disclosed”.
