J. Christopher Giancarlo believes that blockchain could bring transparency to the banking sphere if not strangled by regulators.
In a kеynote address before the Cato Institute, the Commissioner of the Commodity Futures Trading Commission spoke at length about blockchain and its promises for the future, but only after specifying that his remarks do not necessarily reflect the views of his agency.
He started with describing the crisis that hit US in 2008 when Lehman Brothers bank became insolvent. The absence of transparency made inquiring into Lehman’s accounts a tough job. Seven and a half years later, “global regulators still do not have full visibility into the swaps trading portfolios of major financial institutions.” And the US financial regulatory system is “ill-suited to meet the nation’s needs in the 21st century”. The blockchain technology, Giancarlo said, could change the situation.
The Commissioner believes that the range of uses for blockchain is immense, and it “is likely to have a broad impact on global financial markets”, inter alia making new “smart” securities and derivatives possible. It does not go without risks: nearly 2 million banking jobs in Europe and the US could be eliminated over the next decade. However, the potential benefits are enormous, not only for financial institutions but also for regulators who could finally get transparency and be able to cope better with crises.
However, the “first attempt at an Internet of Finance” can be slowed down by regulators if they are not wise enough to adopt “Do No Harm” regulatory model, says Giancarlo. The problem is that blockchain is developing “faster than underlying legal and regulatory frameworks” and governments do not coordinate their actions:
“When regulation does come, it will come from a dozen different directions with different restrictions stifling crucial technological development before it reaches fruition.”
The CFTC Commissioner believes that the US should contact other governments and, instead of “burdening the industry with multiple onerous regulatory schemes”, set forth uniform principles that would “provide the flexibility, certainty and harmonization necessary for the technology to flourish.” Initiative should be left to the private sector and any regulatory uncertainty should be avoided, as well as the “rigid application of existing rules designed for a bygone technological era.”
Without explicitly naming BitLicense, Giancarlo deplored the loss of jobs in the New York financial service industry and pointed at Japan and the UK as examples of a more sensible approach, saying that he suspected the British attitude could be “very good for London’s burgeoning FinTech industry and job creation in the United Kingdom.”
As to the practical steps, Giancarlo suggested CFTC to change its recordkeeping rules to make them compatible with blockchain and other innovations.