CFTC Chairman Says Blockchain Can Be Useful to Automate Regulations

Chairman of the U.S. Commodity and Futures Exchange (CFTC) - J. Christopher Giancarlo - said that the blockchain technology can be effectively used to enforce derivative laws much efficiently. CFTC chairman Giancarlo has had quite positive views on the distributed ledger technology in the past.

While speaking at the D.C. Fintech Week Conference at Georgetown University last week, Giancarlo said that DLT can help to automate regulations for the derivatives market. He says that the DLT-powered Quantitative Regulation will reduce the efforts of regulator to oversee markets while simultaneously reducing costs. DLT when combined with the machine learning algorithms can be used to easily spot the vulnerable segments of the markets with high risks. Furthermore, DLT can also help to standardize Quantitative Regulation and distribute the crucial information to several market players including the regulators.

“We can also envision the day where rulebooks are digitized, 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 analyze the data that comes in through such systems.”

The comments from the high-profile financial regulator comes at a time when regulatory bodies across the globe are trying to match with the speed of fintech innovations taking place. Giancarlo says that the CFTC is looking to bring active form of regulations that can respond to real-time challenges posed by new technologies. He further added that CFTC has “the ability to keep pace with those who attempt to defraud, distort, or manipulate”. This might also indicate that CFTC has already started the development around automating derivative market regulations.

Moreover, Giancarlo also put further emphasis on how DLT and machine learning systems can work together to digitize all the rules and regulations. Moreover, the can also help to consume, process, and perform real-time data analysis. Such systems will help CFTC to have in-depth analysis of the impact of different provisions and how they can be tweaked to attain optimal solution.

“Rather than rely on static rules and regulations that were put in place without knowing exactly the consequences or results they would drive in the market, we may be able to measure data, real-world outcomes, and success in satisfying regulatory objectives,” Giancarlo envisioned.