LabCFTC Director Daniel Gorfine outlined key challenges involved in the regulation of FinTech. In a speech before an ISDA Legal Forum, Mr. Gorfine stated that the challenges of regulating FinTech include (i) the speed of change, (ii) new business structures that avoid traditional gatekeepers and (iii) potentially reduced obstacles to new types of competitors (e.g., technology firms) entering into financial businesses.
Mr. Gorfine said that LabCFTC addresses these challenges by (i) engaging with FinTech innovators, (ii) actively engaging with new technologies that may improve markets and (iii) collaborating with U.S. and international regulatory authorities to "share best practices around FinTech engagement."
Based on a recent CFTC comment request relating to crypto-asset markets and mechanics, Mr. Gorfine identified certain concerns raised by market participants, including Ether (a token of the blockchain platform Ethereum) and Bitcoin. Mr. Gorfine said that issues include, among other things:
- inherent differences between Bitcoin, which is designed to be a payment network, and Ethereum, which focuses on the use of smart contracts;
- a potential shift in Ether from "proof of work to a proof of stake consensus mechanism"; and
- different sizes in the reported market caps of virtual currencies.
Mr. Gorfine reminded market participants that a digital token may be classified as either a derivative on a commodity or as a commodity, depending on the particular token.
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