CFTC Chairman: Crypto Regulation Automated with Distributed Ledger Tech (DLT)

CFTC Chairman Crypto Regulation Automated with Distributed Ledger Tech (DLT)

Technology will never stop evolving, and fintech continues to reimagine new business models. According to recent news, a high-profile financial regulator believes distributed ledger technology (DLT) can enforce laws more effectively.

A new era of regulation

Christopher Giancarlo is a chairman of the US Commodity Futures Trading Commission (CFTC). He explained how distributed ledger technology (DLT) could automate regulation for derivative markets. He shared his thought while speaking at the D.C. Fintech Week Conference at Georgetown University this Wednesday.  

According to Giancarlo, regulations powered by DLT could potentially help regulators to oversee markets while saving costs. Combined with machine learning algorithms, it can be employed to identify different segments of markets. For example, where high risks or unrecognised counterparty vulnerabilities are rising. 

“We can also envision the day where rulebooks are digitised. Also how compliance is increasingly automated or built into business operations through smart contracts, and regulatory reporting is satisfied through real-time DLT networks,” Giancarlo explained. “The machines here at the CFTC would have the ability to communicate regulatory requirements and consume and analyse the data that comes in through such systems.”

Giancarlo stated the above when financial regulators across the world tried to match up their regulatory pace with the advancements of FinTech innovations. He revealed some thoughts regarding data automation and machines. He understands that it is “easy” to fear that they one day would replace humans.

As we think about market regulation that is powered by data automation and machines, it is easy to fear what this may mean for humans. And, to be sure, there will be real challenges presented by these technologies ranging from impacts on labour markets to questions surrounding the explainability of a machine’s conclusions or actions and their consistency with existing regulations to the societal impact of big data collection and automating traditionally human processes.”

However, he explains that we should not fear the new technology but rather see it as a way to enforce what we are doing today.

Regulations around the world

Countries are scratching their heads when it comes to cryptocurrencies and regulation. However, it is a subject that is being discussed more than ever when talking about this new technology. A few weeks ago, a former chairman from CFTC shared his thoughts on how cryptocurrencies should be even more regulated than commodities. Another example is China who recently released a draft regarding regulations for blockchain startups.

Many think that regulation is needed when it comes to the new technology. Giancarlo argues that all market regulators have no choice than to transform alongside new technologies.

In the next decade, the CFTC and, indeed, all market regulators, have no choice but to transform alongside modern digital markets and become quant-driven agencies conducting robust data collection, automated data analysis, and state-of-the-art artificial intelligence.  We have no choice but to become highly effective, “Quantitative Regulators.”

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