CFTC Commissioner Praises Agency’s Crypto Asset Regulation Work Before Today’s Technology Advisory Committee Meeting
CFTC’s Technology Advisory Committee (TAC) Underway, Crypto & Blockchain Dominate Focus
CFTC Commissioner Brian Quintenz expressed gratitude towards his agency’s crypto work in a speech earlier today. Quintenz made the remarks as part of his opening statement before the CFTC Technology Advisory Committee, which is meeting for the second time today.
The CFTC’s Technology Advisory Committee (TAC) is the agency’s primary force of crypto-related regulatory research. At a TAC meeting in February of this year, the committee voted to establish four subcommittees related to crypto-assets, distributed ledger technology, cybersecurity, and automated algorithmic trading.
As Quintenz explained during his speech,
“Those subcommittees have been performed, populated, and meeting,” throughout the year.
The subcommittees are expected to present their work during the second TAC meeting. Discussions will focus on regulatory approaches to new technology.
Quintenz’s speech touched on some of the work the subcommittees have focused on over the last few months, including how these subcommittees are advancing crypto regulations forward.
His statements provide unique insight into how the CFTC is addressing crypto-related regulation, including the steps they’re taking to ensure a fair trading environment for everyone involved.
There are four subcommittees related to crypto, including:
- Virtual Currencies Subcommittee
- Automated and Modern Trading Markets Subcommittee
- RegTech and Robo-Rulebooks Subcommittee
- Distributed Ledger Technology and Market Infrastructure Subcommittee
All four subcommittees are expected to present their findings during the second TAC meeting, including research into how to regulate crypto and how the CFTC will approach crypto moving forward.
The Virtual Currencies Subcommittee Will Discuss the Evolving Crypto Landscape and Regulation
First, the Virtual Currencies Subcommittee “will present on the evolving cryptocurrency landscape,” according to Quintenz’s report, “including questions surrounding the appropriate regulatory framework for various crypto-assets and trading platforms.”
“Issues revolving around cryptocurrency volatility, custody, cybersecurity, taxonomy, and trading practices are all ripe for further discussion. The presentation should spur further discussion about how the CFTC, other regulators, spot platforms, and market participants can all contribute to enhancing this market’s credibility and safety.”
The Automated and Modern Trading Market’s Subcommittee Will Discuss Trading Algorithms
Meanwhile, the Automated and Modern Trading Markets Subcommittee is expected to present discussions on their research into trading algorithms and similar tools, including the risks associated with such tools:
“Next, the Automated and Modern Trading Markets subcommittee will discuss its planned work over the next year to assess the true risks of the modern trading environment. At the last TAC meeting, I highlighted my hope that the TAC could assist the Commission in understanding whether exchanges and market participants are following best practices with respect to automated and algorithmic trading. To the extent market participants are not currently incentivized to follow best practices, or to the extent best practices are failing to adequately address certain risks posed by automated trading, the TAC can advise on whether regulation can play a constructive role in alleviating those risks.”
In other words, automated algorithms might expose firms to liability. The CFTC wants to ensure firms play by the rules even when using automated trading systems.
The RegTech and Robo-Rulebooks Subcommittee Will Discuss How to Regulate Robo-Advisors
The RegTech and Robo-Rulebooks subcommittee will then give a presentation on the increased digitization and automation of financial markets.
“Although the financial markets are now largely digitized,” explains Quintenz, “the regulatory landscape has remained largely inaccessible from a digital perspective for a number of reasons: antiquated data formats, like PDFs, or the common practice of embedding regulatory requirements and relief in no-action letters, guidance, or preamble language, rather than rule text.”
Quintenz believes the CFTC can take a better, more proactive approach to regulating robo-tech in financial markets.
The Distributed Ledger Technology Subcommittee Will Explain Future Regulatory Approaches to DLT
The CFTC has a subcommittee dedicated specifically to distributed ledger technology (DLT). Blockchain is one example of distributed ledger technology, as are Hashgraph and other solutions.
This subcommittee’s presentation will focus on trade reporting, including how firms handle execution, processing, reporting, and record-keeping of derivatives transactions using distributed ledger technology.
The Next TAC Meeting is in January
The CFTC’s Technology Advisory Committee meets twice a year. The first meeting took place in February, and the second meeting is taking place over the coming week. The next meeting is scheduled for January 2019.
To view the full text of CFTC Commissioner Brian Quintenz’s opening statements before the TAC meeting today, visit CFTC.gov here.
If you want to watch the TAC speeches, you can watch it live here.