Bankers Are Trading Crypto. Should They Have to Disclose It to Compliance?

  • Young bankers are piling into crypto investments.
  • Banks have strict rules around personal investments, but crypto trades go largely untracked.
  • But that could change as firms get more involved in digital assets.

Seth, a 22-year-old investment-banking analyst in Chicago making $100,000 in base pay a year, pumps $4,000 per month into new investments. Right now, that’s all going to crypto. 

Seth took the plunge into three digital tokens — bitcoin, ether, and solana — last October. He says he and about 15 friends who also work in finance have liquidated all of their investments in stocks and put that cash into crypto. 

The young banker said he sold off about $25,000 worth of stocks. Between gains and new money he’s put in since, his crypto portfolio has climbed to $177,000 as of November. Insider reviewed screenshots of Seth’s four accounts on platforms like Coinbase and Gemini to verify the total value of his investments. 

“I’m not too worried about any downside scenarios,” Seth told Insider.

Plenty of other young Wall Streeters share his interest. A survey of Goldman Sachs’ summer interns showed that 21% of them had invested in crypto, and 34% believed crypto should be an asset class. We’re using pseudonyms for junior employees quoted in this article because they aren’t authorized by their firms to speak to the media. Their identities and employment have been verified by Insider.

A 25-year-old financial advisor at UBS who’s personally invested in crypto said it’s a big topic among his peers. 

“The advisors that are in their late 60s aren’t talking about this at the dinner table or over drinks, but the advisors that are my age are. It’s dinner-table conversation,” he said. 

And Brian, 27, a third-year investment-banking analyst based in San Francisco, said that the topic of crypto investing crops up constantly among his close friends.  

“Every circle of financial professionals I’ve talked to, that I know and am friends with, have invested” in digital assets, Brian said.

Brian first got meaningfully invested into digital assets in 2016 — primarily in bitcoin and ether, he said — and estimated 20% of his portfolio, or $40,000, is in digital assets. That includes a big chunk of his fiscal year-end bonus, which he received in August.

Crypto, known for extreme


, offers the lure of big gains as well as the risk of big losses. For young Wall Streeters, there’s also less red tape around crypto compared with many traditional investments. That means nearly unprecedented freedom to pump their discretionary income into short-term trades. 

Brian’s firm maintains a private-investments policy in which any investment or trade employees make must be cleared by bank compliance personnel. But he believes those rules aren’t relevant to his trading on Coinbase. 

“I just haven’t done that,” Brian said, adding that the clearance process is cumbersome and slows down trades he wants to make by days. “There’s no way they can find out,” he added.

Wall Street firms generally have detailed policies around what employees are allowed to invest in personally to prevent insider trading and conflicts of interest. 

And while these policies vary by firm and division — traders, dealmakers, and others with client-facing relationships are subject to more restrictions than retail bankers, for instance — most securities traded via brokerage accounts require clearance from compliance. 

Even approved transactions can have holding periods of 30 days or longer, in part to keep workers from getting distracted by day trading.

But crypto is a different story. An Insider review of firms’ policies found that requirements for clearing and reporting trades vary. And platforms like Coinbase offer a venue to trade crypto outside of traditional brokerage accounts, where firms have a framework for monitoring transactions. 

While these young crypto investors aren’t necessarily breaking any rules right now, their investment preferences could set up something of a culture clash should compliance evolve.

“There’s an interesting juxtaposition between the idea of an absolute rule within the firm by fiat that, ‘Thou shalt tell us what you’re trading in,’ versus the libertarian sort of digital-assets space where the right of privacy is of paramount importance,” said Joe Schifano, the global head of regulatory affairs at the trade-surveillance firm Eventus Systems. 

“The younger folks who haven’t lived through prescriptive financial regulation and a mature compliance program in a big bank are not accustomed to the idea that they’ve got to turn over information about what they’re trading in,” he added. 

Ramping up oversight could also mean employees have to sell out of investments or at least transfer them to approved platforms. That’s a big ask at a time when Wall Street is already strapped for young workers. 

“You don’t want to put employees in a position where they can do whatever they like right now and then six months later they have to exit,” Eugene Soltes, a Harvard Business School professor who specializes in compliance and white-collar crime, told Insider. 

The hands-off approach by banks makes sense. But that could change down the road. 

There’s good reason for banks not to have policies against trading cryptocurrencies at this stage — though this is likely to change in the very near future, according to experts. 

For one, there’s little conflict of interest to guard against at this point, since banks have been slow to embrace digital assets. (You can check out a full rundown of which banks are doing what in our digital-asset dossier.) 

“As a consequence, you might actually expect a lighter internal footprint and internal compliance in terms of what people can and cannot trade,” Soltes said. 

There’s also the matter of enforcement. If banks don’t have the capability and resources to monitor crypto trades, it could actually be counterproductive to institute a tighter policy.

“Creating compliance policies that you have no ability to enforce can actually undermine compliance in the organization much more broadly. People see you have policies without teeth,” Soltes said. 

Moreover, bank compliance policies respond to the expectations of regulators, and Wall Street is still waiting on regulatory clarity on cryptocurrencies, the NYU law professor Geoffrey Miller said.

This could rapidly change, however, as some banks have awoken to the potential of cryptocurrencies and are jockeying for position to make up ground when the regulatory requirements are clarified, said Miller, a compliance expert who along with a colleague has taught a course on cryptocurrency business and law since 2014.

“This will be a significant legal compliance issue down the road, without doubt,” Miller said. “Once banks get deeply into crypto, which they’re eager to do, you’re going to find complex regulatory issues will arise.”

Bank compliance policies around crypto trading vary. Some have no limitations, while others have more red tape for certain workers. 

Firms generally keep their compliance rules for employee investments closely guarded, but older policies at a number of firms, including Bank of America and JPMorgan, are laid out in a Securities and Exchange Commission database and offer a sense of what’s involved, such as clearance periods, restrictions for particular asset classes, and processes for making trades.  

But crypto is a rapidly evolving frontier. Insider confirmed the current policies at several of the top

US banks


Bank of America has no requirements for staffers to clear or endure a holding period for their crypto trades, people familiar with the matter told Insider. 

JPMorgan neither prohibits nor requires clearance for employees trading crypto, according to people familiar with the matter. 

Meanwhile Goldman Sachs and Morgan Stanley are the most advanced in digital assets and have more nuanced, specific policies for employees angling to trade crypto. 

At Goldman, which this year relaunched a crypto-futures trading desk it had initially created in 2018, most employees can trade cryptocurrencies without restriction or preapproval, according to company spokesperson Maeve DuVally. The exception: Employees who make markets in crypto-related products — such as bitcoin futures — are prohibited from trading crypto, and staff in the digital-assets group must clear trades. 

Morgan Stanley doesn’t prohibit crypto trading, but it requires employees to report any outside brokerage account, according to a person familiar with the policy. That means someone trading ether in an account with Robinhood, which offers brokerage services, would have to clear the account with the firm, but if they traded with a crypto wallet outside of a brokerage, they would have no such obligation. 

“It’s an evolving compliance space,” this person said, adding that the bank could require more disclosure as it becomes more involved in crypto.

Bitcoin-futures-based exchange-traded funds might actually be one of the more difficult investments for certain bank employees to access right now. 

Wealth clients at some firms can access a small number of physical crypto products. But big wealth firms including Morgan Stanley have held back from allowing clients to purchase newly launched bitcoin futures exchange-traded funds. 

And that kind of restriction can extend to employees. The 25-year-old financial advisor at UBS told Insider that he invested in bitcoin through a digital wallet. He’s interested in investing in futures-based ETFs, but that’s not an option.

“I want to buy the bitcoin ETF,” the wealth advisor said, declining to be identified discussing sensitive information. “We’re not allowed to place that. The trade won’t go through,” this person added, speaking about UBS’ internal brokerage platform. All employees must maintain their brokerage accounts with UBS, the person said. 

Another person familiar with the bank’s policies said that there’s no rule requiring that employees disclose investments they make on venues like Coinbase.

But apart from figuring out how to get their arms around compliance requirements as they wade further into digital assets, banks might have another risk on their hands: Big gains could be a drain on talent. 

A senior Goldman Sachs managing director made headlines in May when multiple outlets reported he quit the bank after making a fortune on cryptocurrency. (CNBC reported it was ether, while The Guardian reported it was dogecoin.) 

“I haven’t made enough that I quit my job by any stretch,” Brian, the 27-year-old investment-banking analyst, said. But, he added: “If I made seven figures on it, I probably would quit my job.”

Additional reporting by Rebecca Ungarino.