The Republican member of Commodity Futures Trading Commission lauded several aspects of the emerging Fintech sector and knocked U.S. financial regulators for what he says is a failure to keep pace with the digital transformation happening in the world’s markets.
During a speech at the American Enterprise Institute, J. Christopher Giancarlo drew a sharp contrast between the simple, transparent, and innovation-friendly approach employed by financial regulators in the United Kingdom, and the rigid approach of U.S. regulators.
The “warm welcome” for new and innovative products given by British regulators is being emulated by financial regulators in Japan, Hong Kong, and Singapore, Giancarlo said.
But U.S. regulatory frameworks — including the CFTC’s — are widely seen as “complex, conservative, and … opaque with limited regulatory initiatives directed towards FinTech,” he continued.
Giancarlo, who often vocalizes his frustrations with the CFTC, said the developments in financial technology, known as FinTech for short, have improved the derivatives markets, including automated trading. But he said several of the agency’s rules are stifling this type of innovation.
“The CFTC’s practices and culture are indifferent to today’s financial technology revolution. If the American economy is to remain the world’s premier, then American market regulation must keep pace with the rapid evolution of digital technologies,” he said.
Giancarlo laid out a five-point strategy for the CFTC and other U.S. market regulators to “catch up to 21st century markets.” First, he said financial regulators must embrace innovation, which includes hiring “innovation-savvy” staff who “speak the language of FinTech.”
He suggested CFTC regulation must be designed to do no harm to blockchain technology — the backbone of the cryptocurrency bitcoin — and other FinTech advancements.
Giancarlo said his agency and other U.S. regulators need to stand up for intellectual property by ensuring all rules protect private information, and by boosting the security of their online systems and electronic databases. Third, the CFTC must “re-purpose rules for the digital age” so they can keep pace with the current digital transformation.
The CFTC and other regulators also need to “unburden the U.S. economy” by removing unnecessary rules and taking steps to prevent overregulation, the commissioner said. Giancarlo urged his agency to avoid stifling market growth or enacting rules that would put U.S. markets at a competitive disadvantage to overseas markets.
“To ensure vibrant, accessible, and durable markets, regulators must cultivate and embrace new technologies without harming innovation,” said Giancarlo. “There certainly must be effective safeguards of market integrity and credibility with strong rule enforcement, but those safeguards should not bar promising innovation and continuous market development.”