CFTC Chair J. Christopher Giancarlo highlighted the ways in which the agency is crafting a "modern regulatory approach" to rapidly changing markets and technological developments, including blockchain technology and cryptocurrencies.
Mr. Giancarlo identified several characteristics of the current period of innovation: (i) "exponential technological change," (ii) the "disintermediation of traditional actors or business models," and (iii) the need for businesses and regulators to be technologically literate. According to Mr. Giancarlo, the CFTC is responding to technological developments by:
- adopting an "exponential growth mindset" that anticipates the pace of technological innovation and the need for appropriate regulatory responses;
- establishing LabCFTC to address the opportunities and challenges that FinTech presents;
- beginning the process of becoming a "quantitative regulator" that is able to conduct independent market data analysis across different data sources, including decentralized blockchains and networks, without being reliant on self-regulatory organizations and market intermediaries; and
- embracing "market-based solutions" to determine the value of technological innovations.
Commentary / Mark Highman
Regulators are attempting to keep up with, and respond to, the rapid growth in financial technology. Mr. Giancarlo described the LabCFTC effort, the SEC formed FinHub and FINRA established a FinTech initiative. While there is a question as to whether new technology requires an entirely new regulatory regime, most regulators are attempting to fit new technology into the existing regulatory framework, albeit with additional guidance as to how to apply existing concepts to new applications. In this regard, it is encouraging to hear Mr. Giancarlo emphasize that innovators and regulators are potential partners, with regulation providing the "guardrails" to innovation.
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