Christopher Giancarlo, Acting Chairman of America’s Commodity Futures and Trading Commission (CFTC), called on government agencies to “embrace innovation, repurpose obsolete rules and unchain U.S. trading markets.” The acting chairman stated:
“The world is changing. Our parents’ financial markets are gone. Tired, old command and control government solutions are bumping up against the new flexible, digital economy. Twenty-First Century markets require 21st century regulation.”
In a speech unveiling a new Fintech LabCFTC, “a start up,” says Giancarlo, before adding “this is a new endeavor for us too, so please be patient as we learn and grow,” the Acting Chairman began somewhat timidly, reminding us of “responsible” innovation, but he couldn’t conclude more forcefully in stating:
“Regulators have to do our part to unchain investors, innovators and job creators to spark America back to strong and sustainable growth and job participation.”
The CFTC, in particular, has been accused of acting irresponsibly by denying regulated digital currency exchanges like Coinbase and Gemini the ability to offer margins and futures trading, a necessary service in any trading market.
Some say that refusal has forced market participants to use shady, unregulated, exchanges, which have been hacked, leading to great losses of more than $70 million, a situation which has not yet changed as shown by Poloniex’s trading volumes.
On that front, the commissioner doesn’t offer much. He suggests LabCFTC will offer a Guiding Points service, a sort of helpline where companies can go and ask what sort of regulations or jurisdictions might apply to their business.
He further suggests regulators themselves might employ some blockchain technology, perhaps act as a “regulatory node” in blockchain projects, introducing CFTC2.0 which aims to establish a FinTech/RegTech innovation lab.
So, no sandbox here, yet, although the commissioner applauds the approach of Britain’s FCA, but the speech might be less about what it does and more about what it may be communicating to this space and wider America.
For Giancarlo appears to be making a bid to take a lead after OCC was disgraced and plunged America in a Fintech regulatory mess. Giancarlo deserves such lead, because he was the first to see the potential, but CFTC is far too limited and what may be preoccupying them right now is sort of last century’s problem as far as this super-fast moving space is concerned.
A space which, on the regulatory front, has only one pressing question (besides the mechanical just allow Coinbase to give margins and futures trading). That question being, will our elders come down on ICOs and treat the very responsible innovators as criminals, or will they update their laws to enable what could be the unleashing of innovation at a never seen before scale?
It’s a tough question and really they’re not the ones who give the answer. This space is global, multi-jurisdictional, which means only what is as close to objectively right can be the answer. But they could take a lead, they could set up a non-regulatory body which guides, sets down lines, not with a hammer, but in a partnership, co-operative manner.
Maybe Giancarlo can run that fast while American regulators have not even taken the first step to try the water, but it appears more likely regulators, including the British ones, will be following our lead, because, all of this is far too new.
That makes it a slight catch 22. You can’t update old laws without knowing just what are you updating them to, but, on the other hand, no one wants to break them and risk punishment. So the best regulators can currently do to “unchain investors, innovators and job creators,” is to follow FCA’s somewhat subtle and implicit approach.
Declare a “beautiful partnership,” which really translates to go ahead do what you please as long as it’s reasonable and good intentioned and if it might break some law here or there it doesn’t matter as long as you’re not being immoral in engaging in fraud or deception or theft and the rest.
That is, give the green light and declare America open for business. Make it clear to innovators, businesses and companies they should not fear punishment if they are good intentioned and take the precautions anyone would expect.
While at the same time recognizing sometimes things do go wrong. Space rockets explode, nuclear power stations do too as in Japan, airplanes even now do come crashing. The same lines of “accident” or “intentional” can be applied to this space too, especially at this early stage when smart contracts are not yet even two years old.