US Commodity Futures Trading Commission Launches Major Fintech Initiative: LabCFTC

The US Commodity Futures Trading Commission (CFTC) will embark on a “major Fintech initiative” with the creation of LabCFTC. The venture was launched to promote responsible Fintech innovation and to encourage competition in the markets the CFTC oversees.

“Simply put, LabCFTC is intended to help us bridge the gap from where we are today to where we need to be: 21st century regulation for today’s digital markets,” said CFTC Acting Chairman J. Christopher Giancarlo. “The purpose of LabCFTC is twofold: The first is to provide greater regulatory certainly that encourages market-enhancing FinTech innovation to improve the quality, resiliency, and competitiveness of our markets. The second is to identify and utilize emerging technologies that can enable the CFTC to carry out its mission more effectively and efficiently in the new digital world.”

Located in New York City, LabCFTC will accelerate CFTC engagement with Fintech and related Regtech. The initiative was approved by a unanimous vote of the Commission. The creation of “Sandbox” type environments, where early stage Fintech firms may experiment in live environments under the eye of regulators was popularized the UK Financial Conduct Authority (FCA). Since the FCA announced their Sandbox concept it has been replicated around the world. The US government has been slow to embrace financial innovation. The CFTC Fintech sandbox is the first governmental agency to act upon the realities of a quickly changing financial ecosystem by creating an in-house lab.

LabCFTC will be the agency’s focal point to promote Fintech innovation and fair competition by making the CFTC more accessible to Fintech innovators and serving as a platform to inform the CFTC’s understanding of new technologies.

LabCFTC will also be an information source for the Commissioners and the CFTC staff on responsible innovation that may influence policy development.

The CFTC said the pace of change has accelerated in recent years. Today, Fintech is driving innovation in financial markets across the globe. These technologies have the potential for significant or even transformational impact on CFTC regulated markets and the agency itself.

The Core LabCFTC Components will be:

  • GuidePoint: Available today, GuidePoint is a dedicated point of contact for FinTech innovators to engage with the CFTC, learn about the CFTC’s regulatory framework, and obtain feedback and information on the implementation of innovative technology ideas for the market. Such feedback may include information that, particularly at an early stage, could help innovators/entities save time and money by helping them understand relevant regulations and the CFTC’s oversight approach.
  • CFTC 2.0: An initiative to foster and help initiate the adoption of new technology within the CFTC’s own mission activities through collaboration with FinTech industry and CFTC market participants.

To accomplish the agency’s goals, LabCFTC will facilitate:

  • Through proactive engagement with the innovator community, a better understanding in the CFTC of how new innovations interact with the regulatory and supervisory framework, and identification of areas where the framework could better support responsible innovation.
  • Collaboration among the FinTech industry and CFTC market participants that facilitate responsible innovation in our markets and promote the use of technology within our agency. This collaboration will benefit many businesses and members of the public that rely on the derivatives markets the CFTC oversees.
  • CFTC participation in studies and research that facilitate responsible innovation in the markets and promote the use of technology within the agency.
  • Cooperation with financial regulators at home and overseas.
  • Monitoring of trends and developments to ensure that CFTC’s regulatory framework supports – and does not unduly impede – responsible technological innovation.
  • Information sharing about applications of FinTech, including potential use cases, benefits, risks, and solutions.
  • Engagement with academia, students and professionals on applications of FinTech relevant in the CFTC space.
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