On March 29, 2016, J. Christopher Giancarlo, the Commissioner of the U.S. Commodity Futures Trading Commission, or CFTC, spoke at the Depository Trust and Clearing Corporation 2016 Blockchain Symposium. His speech encouraged regulators to treat the development of blockchain technology like they treated the internet by adopting a “do no harm” approach.
Giancarlo evaluated the success of this approach during the rise of the internet. Essentially, regulators did not implement burdensome controls, and as a result, the internet created millions of jobs, transformed the economy, and improved living standards globally. Giancarlo expressed the belief that blockchain technology, which he also referred to as distributed ledger technology or DLT, could make a similarly dramatic impact in the world of finance. Giancarlo stated: “DLT has the potential to link networks of legal recordkeeping the same way the Internet connects networks of data and information.”
Giancarlo also considered the potential of blockchain technology to help prevent financial disruptions. As an example, he suggested that prudent regulators could use data mining tools, smart contracts, and other blockchain applications to track and recognize anomalies in trading activity and risk exposures—tools that would have allowed regulators to react sooner to the collapse of Lehman Brothers in 2008.
Giancarlo also cited one study estimating that blockchain technology could one day save financial institutions as much as $20 billion in infrastructure and operating costs each year. Based on these potential benefits in the financial sector, he asked regulators to allow the technology to develop with minimal regulation and to help foster investment and innovation. He said the best approach would be to imitate the Telecommunications Act of 1996 and the Clinton Administration’s “Framework for Global Electronic Commerce,” both of which let the private sector take the lead.
Without a “do no harm” approach, Giancarlo expressed concerns that financial institutions and technology firms will be faced with complex and overlapping regulatory frameworks from different jurisdictions and agencies—a situation the industry is already facing.
Specifically, Giancarlo encouraged the CFTC to revisit its recordkeeping rule, which requires all books and records to be kept in their original or native format. Giancarlo suggested that the rule be revised to accommodate blockchain innovations.
Giancarlo noted that his speech reflected his own views and not those of the CFTC. Giancarlo was sworn in as a member of the five-person Commission in June 2014. He is one of only three commissioners, as two positions are currently vacant. His term expires in April 2019.