Blockchain and Crypto Are Two Key Phenomena Transforming Today’s Markets

United States Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo has said the agency’s fintech innovation hub LabCFTC is the regulator’s internal stakeholder in a landscape of exponential technological change and market evolution.

Giancarlo made his remarks during his last appearance as CFTC chairman before the 44th Annual International Futures Industry Conference on March 14, in an address entitled “Improving the Past, Tackling the Present, and Advancing to a Digital Market Future.”

Giancarlo is expected to be replaced this year by the U.S. president’s nominee for the CFTC chairmanship, Heath Tarbert, assuming the latter’s confirmation.

In his remarks, Giancarlo identified “the disintermediation of traditional actors and business models” as a key factor that challenges existing regulatory models, isolating blockchain and cryptocurrencies as two key phenomena that are transforming today’s markets.

To respond to the challenge that this exponential change poses for federal regulators, the chairman noted that a cornerstone of the CFTC’s approach was the establishment of its own internal stakeholder: LabCFTC.

According to Giancarlo, LabCFTC —  which launched two years ago — has had over 250 separate interactions with both big and small innovators, conducting lab hours across the U.S. and internationally.

The chairman stressed that the lab is not a regulatory sandbox and does not exempt firms from CFTC rules, but rather aims to provide an “internal and external technological focus.” He said:

“Internally, it means explaining technology innovation to agency staff and other regulators and advocating for technology adoption. Externally, that means reaching out and learning about technological change and market evolution, while providing a dedicated liaison to innovators.”

Among its activities, Giancarlo highlighted the lab’s fintech cooperation agreements with global regulators — in London, Singapore and Australia — as well as its publishing of technology primers and public feedback solicitations.

Giancarlo notably aligned the hub’s creation and work as part of a nationwide trend across agencies, stating that “every US federal financial regulator has either created or is creating a program similar to LabCFTC.”

Aside from the Lab, the chairman noted that the CFTC is embracing market-based solutions for innovation, as with its authorization of Bitcoin (BTC) futures, and is striving to become a quantitative regulator — one that is “able to conduct independent market data analysis across different data sources, including decentralized blockchains and networks.”

As previously reported, LabCFTC’s two fintech educational primers have been devoted to virtual currencies (October 2017) and smart contracts (November 2018). In December, the lab solicited public and industry comments on the Ethereum (ETH) blockchain as part of its evaluation of prospectively authorizing Ethereum futures contracts.