US Commodities Regulator Establishes Crypto and DLT Committees

The Commodity Futures Trading Commission (CFTC)’s Technology Advisory Committee met today, hosting back-to-back panels on the subject of cryptocurrencies, blockchain and regulation.

The meeting brought together influential figures from both the public and private sectors, with participants primarily raising issues related to markets, the regulation of the new technologies and the role of regulators in participating in the development of the technologies.

Indeed, the event had one tangible outcome from the get-go – just prior to the break, the committee approved the creation of two subcommittees, with one devoted to cryptocurrencies and the other on broader application of distributed ledgers in the finance space.

The event notable saw Brian Quintenz advocate for self-regulatory efforts around cryptocurrencies, a position he reportedly expressed during a pre-event press conference.

Quintenz reiterated this position during his opening remarks and also told attendees that “the CFTC should not attempt to make value judgments about which new products are securities.”

“The markets, investors and consumers need to decide that for themselves,” he said. Quintenz did, however, also lend support to the Commission’s efforts to prevent fraud and market manipulation.

As for the blockchain, several panel participants – including those drawn from the ranks of the CFTC itself – said that new regulation was required in order to accommodate the technology.

“The futuristic visions of regulatory oversight must incorporate DLT as it continues to improve and mature,” Dan Busca, deputy director of the CFTC’s division of market oversight. “Trying to adapt a system to meet regulations as an afterthought is often costly and inadequate.”

Busca later suggested that that blockchain could be a potential tool for regulators, highlighting how market watchdogs would operate their own nodes on a distributed network and be fed information in real-time.

“The evolution of DLT could allow regulators to access data seamlessly every time a trade is posted on a particular blockchain without the need for human intervention or intermediaries;” this, in turn, would make the CFTC more “nimble and efficient,” Busca claimed.

Private sector perspective

Committee members from the private sector expressed mixed views on cryptocurrency and blockchain regulation and the extent to which regulators should involve themselves.

Charley Cooper, managing director of R3, appealed to regulators to boost their involvement in the blockchain and cryptocurrency industries.

“We would ask as passionately as possible for the US regulators and members of the agencies of the government to become more active than you already are,” he said. “I can tell you that there are federal governments around the world that are way outpacing the U.S. government. And that’s a concern.”

Brian Knight, a senior research fellow at George Mason University’s Mercatus Center, raised concerns about the expanding role of regulators in cryptocurrency and blockchain, and said such involvement could prove problematic.

“If we’re going to have the regulator serve as a kind of consultant, how do we make sure that’s fair?” Knight queried.

And, as demonstrated by its decision to form cryptocurrency and blockchain specialized subcommittees, the Technology Advisory Committee indicated that its exploration of the technologies will be ongoing and that it expects them to have a “transformative impact on trading, markets and the entire global financial system.”

Committee table and microphone image via Shutterstock

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