“The Commission would like the ability to partner, collaborate, or engage in a cooperative agreement regarding emerging financial and compliance technologies with persons or entities; Federal, State, or local agencies or instrumentalities; or foreign governments or international organizations. Legislation recently introduced by Congressman Austin Scott provides such authority and would greatly enhance the Commission’s ability to keep pace with emerging technology, explore its potential, and facilitate its adoption.”

There exists legislation today, the “Commodity Futures Trading Commission Research and Development Modernization Act” (HR 6121), that may address this regulatory shortcoming.

Asked how the bill will improve the CFTC, Giancarlo said he has been approached by some of the most interesting innovators in the space – especially in the areas of blockchain. He shared an example of multiple organizations coming together to experiment with a blockchain based trading platform, mentioning credit default swaps and bank payments.

Giancarlo said they were invited to join in the project;

“Hey CFTC, why don’t you participate in this proof of concept [PoC]?” – Giancarlo said they asked.

The collaboration would include an embedded team from the CFTC to observe. Giancarlo speculated about a CFTC node being created in the blockchain where the Commission could monitor all of the activity – the Holy Grail of Regtech. But the CFTC is barred from this type of participation within the private sector.

No Gifting to the CFTC Allowed

The bill would now allow the CFTC to participate in these types of proof of concept projects so they can learn and, hopefully, become better prepared for the digital future of finance.

Posing a rhetorical question in response to a query from Representative Scott, Giancarlo asked why is this so important?

“Because we are falling behind,” Giancarlo stated. “Just two days ago, the Bank of England announced that they are putting in a new bank to bank payment system in the UK and it’s going to be blockchain compliant … they have had the last four years, under what they call project innovate, to participate in all of these blockchain beta tests that we have not been able to participate in.” “I feel like we are four years behind…”

Giancarlo said first he wants to understand how things work before there is any type of appropriation action to invest into a new, potentially blockchain powered, system.

The financial services sector is a global market yet regulatory jurisdictions are largely established by national boundaries. Understanding the need to compete on a global level in financial services would help with any legislation, or regulatory action, that may be focused on domestic need but inevitably may impact, perhaps negatively, international activity.

The video of the hearing is below.