Commissioner Giancarlo Advocates "Do-No-Harm" Approach to Blockchain Regulation
Commentary by Steven Lofchie
CFTC Commissioner J. Christopher Giancarlo called for a "do-no-harm" regulatory approach to the emergence of distributed ledger technology – also known as "blockchain" – which he stated could be as revolutionary for the financial world as the internet has been for sharing information. To reap the advantages of blockchain, he stressed, overlapping regulations with different restrictions should not be allowed to stifle its development.
Commissioner Giancarlo urged regulators not to impede innovation and unconstrained investment in blockchain. In order to nurture the technology, he advised, regulators must provide a "predictable, consistent and straightforward legal environment" that will allow the private sector to develop this technology from the "bottom up."
In the absence of a "do-no-harm" approach, he warned, financial service and technology firms would be forced to try to navigate a complex regulatory environment, where multiple agencies imposed their own differing rule frameworks, issues and concerns. It is critical, he said, for U.S. and foreign regulators to adopt a unified principles-based approach to regulation – one that is "flexible enough so innovators do not fear unwitting infractions."
He urged the CFTC to revisit its own recordkeeping rules, particularly CFTC Rule 1.31, in order to allow regulators to accommodate blockchain and other innovations that promote efficiency, accuracy and security in recordkeeping.
Commentary
The "do-no-harm" approach seems applicable to a great deal of financial regulation.
Until the CFTC adopts that approach, it will be burdened by heavily politicized rule proposals in search of nonexistent problems. For example, the CFTC would be wise to do no harm when regulating position limits on energy. Any cost-benefit analysis of that proposal likely would yield a very high price; common sense indicates that the power of sovereign nations to pump or withhold oil far outweighs the ability of speculators to hoard.
The current regulatory culture seems less inclined to "do no harm" than to "leave no gap."