At a speech delivered to the pro-market Cato Institute, CFTC Commissioner Caroline Pham has called for a Regulatory Sandbox.
The UK Financial Conduct Authority (FCA) pioneered the Sandbox concept. The approach was to allow innovative Fintech firms to test products and services under the watchful eye of regulators. While the Fintech may never have their product released to the wild, it is also an opportunity for regulators to learn from entrepreneurs and Fintech innovators – a mutually beneficial outcome.
Pham said the “world waits for no one,” and it is time for the US to move forward and experiment with blockchain technology and digital assets as the “wait and see approach” is not working.
Commissioner Pham stated:
“Today, I will propose that the CFTC launch the first-ever U.S. pilot program for digital asset markets. Our principles-based framework is built for innovation in technology, new products, and market structure. In waiting and seeing, we’re missing opportunities to capitalize on all the benefits of the technology before us, while others take a more strategic and long-term view. The U.S. may soon find ourselves constantly playing catch-up, unable to effectively leverage this technology for economic growth.”
Pham said that jurisdictions around the world are moving forward, yet the US remains in neutral. “Staying ahead of the curve requires being ready to look to the future and preparing to embrace change,” said Pham.
The Commissioner outlined some potential parameters for a new program:
- Trading Rules
- Reporting Requirements
- Registration Requirements
- Risk Disclosure Statements
Pham said the pilot program would ensure “responsible innovation.”
While Pham’s proposal makes a lot of sense, don’t hold your breath on any changes in the near term. The current Administration has taken a largely hostile approach to digital assets and the SEC has staked a claim that all digital assets are securities (except Bitcoin), and thus regulated by them and required to adhere to securities law. A pilot program may require a change in administration for it to gain traction or maybe Republicans holding both the House and the Senate.
