CFTC member: Some suggestions for U.S. regulators to promote blockchain development in 2017

Rage Review : As a member of the Commodity Futures Trading Commission nominated by the President of the United States, the author of this article has made in-depth observations and analyses of technologies such as distributed ledgers, and has professional insights into the prospects for technological development and the benign interaction methods between regulators. This article systematically analyzes the development trends of emerging blockchain technologies around the world and the direction of regulatory adjustments in various countries, and proposes practical strategic implementation steps to U.S. financial regulators. This article aims to achieve a benign mutual assistance between technological progress, financial market stability, and government regulation.

Translation: Annie Xu

He has spoken a lot about blockchain technology because of his belief in its potential benefits to financial markets and financial regulators.

The 2008 financial crisis brought a complex financial activity and capital regulatory environment to the world. Distributed ledger technology may help market participants cope with this complex operation, transaction and capital management activities.

For regulators, distributed ledger technology can provide a single true record of financial transactions, cutting across loose regulatory frameworks.

However, the adoption of blockchain technology requires cooperation among regulators to encourage investment and innovation in distributed ledger technology.

To this end, at the beginning of the year, a feasible technology development plan was proposed to the Commodity Futures Trading Commission (CFTC) and all financial regulatory agencies, which was broken down into five major steps.

1. Establish an elite team: Financial regulators should establish a professional technical team and work closely with Internet financial companies. Together with traditional and emerging companies, they should explore how new technology products and services and business models derived from innovative technologies can be integrated into the existing regulatory framework.

2. Provide development space: Financial regulators should provide a regulatory environment that is conducive to innovation and development, similar to the regulatory sandbox of the UK Financial Conduct Authority (FCA). This will allow Internet financial companies to cooperate with regulators and have sufficient space for innovation, development and testing without having to worry about regulatory enforcement and penalties.

3. Active participation: Financial regulatory agencies should directly participate in the research and development of Internet finance concept proof mechanisms to better understand the regulatory issues of technological innovation and explore the positive significance of innovation to regulatory activities.

4. Listen and learn: Financial regulators should work closely with Internet finance innovators to explore how to adjust regulatory policies and norms to promote the development of 21st century technologies and business models.

5. Global cooperation: Financial regulatory agencies should set up professional teams to help Internet financial companies become familiar with and adapt to the judicial procedures of different regions and regulatory authorities at home and abroad.

The last step is to recommend that financial regulators explore how to help Internet financial companies avoid the cumulative negative impact that may be inflicted on them by regulators in different regions.

Because emerging technologies such as distributed ledgers may provide benefits that go beyond the regulatory system, financial regulators must develop unified rules and regulations as early as possible to avoid hindering the trend of innovation.

The CFTC and other U.S. financial regulators already lag behind other countries in related jurisdictions.

For example, the FCA has established an Innovation Hub to allow Internet financial companies to provide innovative financial products and services to the market and test new ideas in the Regulatory Sandbox it provides.

At present, many national judicial institutions have begun to emulate the FCA's sandbox mechanism.

2016 is about to end, and it is a good time to summarize the achievements of this year and plan for the future.

Adjustments to U.S. regulatory policies have forced us to re-examine the development of distributed ledger and Internet financial technology innovations.

The five steps above are also a plan for the future. Everyone should work hard to promote the development of these technologies to achieve a healthier U.S. financial and capital markets and create benefits for market participants and American working people.