CFTC Chair J. Christopher Giancarlo outlined CFTC initiatives for improving regulatory effectiveness, and for promoting technological development in trading markets through regulatory technology ("RegTech") centered efforts.
In remarks at the Singapore FinTech Festival, Chair Giancarlo suggested that the CFTC and other regulators have not been successful in keeping pace with technological developments in the trading markets (e.g., artificial intelligence, smart contracts and blockchain). He framed the LabCFTC initiative as the central CFTC effort to facilitate FinTech innovation.
Chair Giancarlo explained that RegTech is a way for regulators to improve the effectiveness of market oversight through improved efficiency, cost saving, and other performance-related enhancements. He identified four key factors essential to the development of RegTech: (i) improved computing power, (ii) accessibility of data through digital networks and "smart" physical objects, (iii) enhanced data analytics capabilities, and (iv) advances in machine learning.
Chair Giancarlo touted the potential of RegTech, and pointed to distributed ledger technology (e.g., blockchain) as an element that is capable of further facilitating more efficient regulatory reporting. Through blockchain and smart contract development, Chair Giancarlo envisions the possible "decrease of execution risks, more efficient use of trade-related margin and collateral, and the incorporation of automated regulatory compliance provisions into the contract code."
In addition to the positive effects of RegTech advances, Chair Giancarlo emphasized that such development only amplifies the importance of cybersecurity vigilance. While acknowledging the associated risks, he noted that technology is also likely to play a role in presenting solutions to security-related issues.
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