In late 2017, as a newly appointed commissioner at the Commodity Futures Trading Commission, I played a key oversight role in the introduction of the first U.S. bitcoin futures contracts. The experience epitomized how regulators and policymakers often find ourselves on the tail of technological advancement, scurrying to keep pace with innovations that improve market efficiencies and open markets to new products and participants, while rewarding those willing to take risk.
The market for crypto-assets has matured, and the introduction of federally regulated exchange-traded bitcoin products has increased price stability and compelled institutional interest in crypto-assets and their underlying financial technologies, more commonly known as “FinTech”.
In February, J.P. Morgan announced the creation and successful testing of a digital coin based on blockchain technology; and earlier this month, the Wall Street Journal reported that Facebook is actively recruiting financial firms and merchants in an effort to launch a cryptocurrency-based payment system. These two developments prove that the technology can successfully integrate with our financial infrastructures, demonstrating its usability and adaptability.
At this inflection point, where the technology could become a common and social good rather than a significant threat to financial stability, the regulatory patchwork is our greatest hurdle to mainstreaming integration and adoption.
Policy, Regulatory Pace Is Tepid
The policy and regulatory response to FinTech has been tepid in stark contrast to the mania for anything in token form. Although many U.S. regulators, including the CFTC, have created FinTech hubs to engage technologists, legal practitioners, and investors, most of these efforts have yet to move us beyond contemplation.
Additionally, the multiple public and private sector calls for a comprehensive, coordinated, and clear approach to blockchain technology—including my own suggestion that the Financial Stability Oversight Council convene U.S. financial regulators to propose a FinTech agenda—remain unanswered.
More needs to be done to effectively capture the breadth and potential market impact of FinTech for safe and transparent public consumption.
As we ponder our priorities, ongoing regulatory uncertainty may be leading firms to delay the launch of new innovations or to choose not to launch them in the U.S.—a potential economic and national security risk none of us should discount.
A similar technological inflection point occurred in the 1980s when the intersection of agriculture and biotechnology started to deliver products for consumer consumption. Recognizing the gravity of the moment—and still decades ahead of mass adoption that has since greatly increased agricultural efficiency—President Reagan, through the White House Office of Science and Technology Policy (OSTP), convened the Domestic Policy Council Working Group on Biotechnology.
After exhaustive deliberation among the nation’s foremost experts in agriculture, science, law, and policy, and with input from the public, OSTP finalized the Coordinated Framework for Regulation of Biotechnology in 1986.
More than 30 years later, the Coordinated Framework dictates the regulatory system of three separate federal agencies to evaluate agricultural biotechnology products: the USDA, EPA, and FDA. The Coordinated Framework is far from perfect; however, the leadership initiative from the White House should serve as a model for the current FinTech inflection point.
Learn Lessons from Reagan Administration
Given advancements in FinTech, and the ever-present role of technology in finance, without such leadership, we could end up scratching our heads in 30 years wondering why we did not do it differently. If we want to catch the tail—and perhaps even set the course, the White House should take the lead and push the FinTech conversation now.
OSTP may be the right place to start. Convening markets, banking, tax, legal, privacy and security experts with technologists and academics, while collecting public input, the conversation can, like the 1986 Coordinated Framework, produce a roadmap to regulatory certainty, which may include legislative proposals for the Congress to consider.
I am concerned that without such an initiative, the current assortment of U.S. regulators will resist taking the much needed independent and multi-lateral action because of jurisdictional turf wars, perceived or real lack of statutory authority, and fear of taking risk while the technology develops.
Let’s take action now by cutting a clear path to incentivize innovation, reduce risk, improve market efficiencies, and create stronger privacy protections, while supporting job creation and economic growth.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Rostin Behnam is a commissioner at the U.S. Commodity Futures Trading Commission. Prior to joining the CFTC, he served as senior counsel to U.S. Senator Debbie Stabenow of Michigan, ranking member of the Senate Agriculture, Nutrition, and Forestry Committee.
The views expressed by Commissioner Behnam are his own and do not represent the views of the CFTC, its staff, or any fellow commissioners.
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