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Italy’s Commissione Nazionale per le Società (CONSOB) this year has brought to light some digital challenges facing regulatory bodies in the 21st century. The just concluded CONSOB had a number of regulatory agencies in attendance, including the US CFTC.
Comparing the digital world today to the Futurist movement in art and literature in 1909, the chairman of the US Commodity Futures Trading Commodity (CFTC), Christopher Giancarlo, educated his audience on how desperate times call for desperate measures. Why fight a new problem with an archaic solution? Why regulate new markets with old regulatory framework? This is, without a doubt, a major digital problem that regulatory bodies are facing today. Times have changed. We are no longer in the 90’s. This is the 21st century and everything is different now.
Of course, there was innovation in the 90’s; however, things are a lot different now, as technologies are emerging at an exponential rate. And worse, regulators are left to handle this ever-changing market with the framework created decades ago.
Shedding light on what he termed the Digital Futurism – that is the distinctive relationship between technology, markets, and regulation – Giancarlo urged his fellow financial regulators to adopt new regulatory frameworks that would both encourage the growth of new innovative markets and keep them in check at the same time.
Blockchain Could Have Prevented the Housing Bubble in 2018
He began his speech by taking stock of how far blockchain technology has come and how much difference it would have made if it was around during the housing bubble in 2018. He stated:
“Imagine what a difference it would have made a decade ago on the eve of the financial crisis if regulators had access to the real-time trading ledgers of large Wall Street banks, rather than trying to assemble piecemeal data to recreate complex, individual trading portfolios.’
If blockchain was adopted in as early as 2008, the housing bubble and crisis could have been averted as regulators would have all the necessary data to make informed decisions and intervene before it was too late. Well, let’s come back to the present. How much potential does blockchain technology hold? How much impact can it make in our market today? How well can it scale the financial market? The answer is a lot. Blockchain technology has proven to hold a lot more potential than merely to aid transactions. Why chase it out the door when you can harness these astounding potentials?
Giancarlo admonished his fellow regulators and urged them to devise new means of approach to handle these emerging cryptocurrency technologies, instead of shutting them out. He went further to share with them the innovative strategy that the CFTC is using to regulate this new market. Explaining the importance of adopting an exponential growth mindset, creating an internal FinTech Stakeholder, becoming a quantitative regulator, and embracing market-based solutions.
While the CFTC response to FinTech innovation and modern market regulation may not be a one-size-fit all solution, it is undoubtedly a good way to begin. The market has evolved over the years, and laws should too.