Speaking in Berlin this week, Commodity Futures Trading Commission Chair J. Christoper Giancarlo addressed the Association of German Banks. His theme was the pressing need for regulatory harmonization.
Today, across developed markets, varying financial regulations adds a significant cost to the financial services industry. Same products and services offered in different countries must endure a plethora of rules and regulations that demand specialized knowledge within each jurisdiction. The cost to comply to national rules is inevitably passed onto the end users of each service. It simply makes sense to pursue regulatory harmonization to increase the value created by financial regulators.
“I am very aware that the rules and regulations adopted in the United States impact firms around the world, including financial institutions here in Germany. Therefore, it is important that you know that I am committed to cross border regulatory harmonization … We need greater harmonization. We also need to be consistent, reasonable, and cost-efficient.”
While complex and, at times, extremely arcane, a goal of coordinating rules to reduce the cost to consumers and businesses is an important objective. Giancarlo references the recently published CFTC white paper entitled “Regulatory Reform 2.0.” that specifically tackled Swaps. Revealed last month, buried within the document was the opinion that blockchain technology possesses powerful Regtech potential;
“… should collaborate with other authorities to cultivate the development of “regulator nodes” on distributed ledgers [Blockchain]. The full potential of DLT in trade reporting is to transcend the fragmented regulatory structure by providing reference to a single, validated record of all financial transactions/positions across regulated markets.”
Blockchain utilization within Regtech is inevitable. But will the world’s financial regulators in developed nations be the first to embrace Regtech powered by blockchain? At a minimum, it appears the CFTC is willing to proceed.