CFTC Commissioner Binds Smart Contracts with Regulations

The 38th annual GITEX Technology Week Conference took place yesterday 16 October in Dubai and US Commissioner Brian Quintenz attended as a speaker. Quintenz was nominated by President Obama and later Trump as a Commissioner of the US Commodity Futures Trading Commission (CFTC). However, Quintenz makes it clear in his speech that the views he shares are his own and do not represent the opinions of the Commission. While this is a somewhat typical and protective statement to make, it also adds some weight to any financial predictions in the speech since Quintenz does have a history of hedge fund investment.

Here are the main points of his speech at GITEX.

Quintenz starts the speech in a typical fashion, thanking GITEX for the opportunity to attend his first GITEX conference and acknowledgements to Dubai officials and people of importance before getting to the meat of the topic, technology and blockchain. He talks about how it’s interesting to see the market get to grips with a technology that wasn’t considered when the rules and regulations were made and how he expects this to be a pressing issue in the future.

Next Quintenz moves on to discuss how blockchain works, breaking down the three parts of blockchain as he sees it – developers, users and miners – presumably to make the speech more accessible for those not overly familiar with the subject. Smart contracts naturally follow on from this with Qintenz explaining how some blockchain networks such as Ethereum allow for smart contracts. Smart contracts are essentially a code containing all terms of a contract that is self-enforcing. The example Brian uses is if you purchased a flight with cryptocurrency under a smart contract, and the flight was delayed, you would be automatically refunded. Quintenz talks about how smart contracts may work, and what questions we’ll have to look at if they do become a common feature in financial markets in order to make them compliant with current regulations.

Quintenz focuses his talk around the effect cryptocurrency smart contracts would have on US persons and US financial markets but goes on to acknowledge that the variability of international regulations will likely raise issues. For example, the US heavily regulates trading in event contracts, but the UK views them as a permitted form of wagering captured under gambling laws.

In the final segment of his speech, Quintenz disagrees with the popular saying “the code is law,” meaning if the code allows it then the action should be allowed. Quintenz makes the point that regulations are the law and they should apply to code as they do other areas of society.

Quintenz did a good job at the conference in highlighting the predicted future of blockchain within a financial setting. The section around smart contracts was well handled in terms of balancing the risks and also the potential they have to bring great things to the market.

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