Distributed Ledger Tech (DLT) can Automate Regulation: CFTC Chairman

Christopher Giancarlo
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As FinTech continues to reimagine new business models for finance, a high-profile financial regulator believes it can also be used to enforce derivative laws more effectively.

J. Christopher Giancarlo, the chairman of the US Commodity Futures Trading Commission (CFTC), highlighted distributed ledger technology (DLT) and how it can automate regulations for derivative markets while speaking at the D.C. Fintech Week Conference at Georgetown University this Wednesday.

Quantitative Regulation

DLT-powered Quantitative Regulation, according to Giancarlo, could help regulators to oversee markets more efficiently while saving costs. Combined with machine learning algorithms, it can be employed to identify the segments of markets where high risks or unrecognized counterparty vulnerabilities are rising. Also, the CFTC chair noted that Quantitative Regulation could standardize and distribute critical information to market actors – including regulators.

“We can also envision the day where rulebooks are digitized, compliance is increasingly automated or built into business operations through smart contracts, and regulatory reporting is satisfied through real-time DLT networks,” Giancarlo explained. “The machines here at the CFTC would have the ability to communicate regulatory requirements and consume and analyze the data that comes in through such systems.”

The comment came at a time when financial regulators across the world are attempting to match up their regulatory pace with the velocity of FinTech innovations. As Giancarlo put, CFTC is looking into an active form of regulation, which can respond to real-time challenges posed by new technologies. He specifically mentioned decentralized markets and disintermediated traditional actors while referring to the said challenges.

Giancarlo confirmed that the CFTC has “the ability to keep pace with those who attempt to defraud, distort, or manipulate,” hinting it may have already started building systems that will automate derivate market regulations.

Digitizing Rule-Sets and Reporting Real-Time Data

Giancarlo stressed how their machine learning and DLT systems would be able to 1) digitize rules and regulations and, 2) consume, process, and analyze data in real-time. Moving the CFTC to such a technology would enable it to analyze data as it gets reported. It would further allow the regulatory agency to study the impact of certain provisions and how they can be modified to ensure an optimal outcome.

“Rather than rely on static rules and regulations that were put in place without knowing exactly the consequences or results they would drive in the market, we may be able to measure data, real-world outcomes, and success in satisfying regulatory objectives,” Giancarlo envisioned.

The full speech of J. Christopher Giancarlo is available at this link.

Featured image from Shutterstock.

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US Regulator Wants to Adopt Blockchain to Maintain Pace with Market Manipulators

The chair of the U.S. Commodity Futures Trading Commission (CFTC) has said that he wants to adopt blockchain to “keep pace with those who attempt to defraud, distort, or manipulate” financial markets.CFTC Chairman Giancarlo Envisions Compliance Built into Business Operations Through Smart ContractsJ. Christopher Giancarlo spoke about the use of blockchain and machine learning for regulatory purposes at Georgetown University. The head regulator is confident the digital era will prove to be a positive factor to better oversee financial markets.“These tools will become even more paramount as emerging blockchain technologies seek to decentralize markets or disintermediate traditional actors. It is critical that we have the ability to keep pace with those who attempt to defraud, distort, or manipulate.”Giancarlo gave several examples of adoption of new technologies at the regulatory level.These include “using machines to independently identify segments of the markets where concentration risks or unrecognized counterparty exposures are emerging and flag them for staff consideration and action” and “new machine-learning based surveillance tools” designed to “sniff out patterns of likely illegal trading activity or attempts to manipulate markets for enforcement analysis.”The CFTC chair said the ongoing digital revolution in the world’s trading markets have far-ranging implications for capital formation and risk transfer. He added that he expects the majority of standard tasks to be managed by machines as automation technologies are paired with blockchain to standardize and distribute data to market actors and regulators.“We can also envision the day where rulebooks are digitized, compliance is increasingly automated or built into business operations through smart contracts, and regulatory reporting is satisfied through real-time DLT networks. The machines here at the CFTC would have the ability to communicate regulatory requirements and consume and analyze the data that comes in through such systems.”Giancarlo has recently stated that cryptocurrencies “are here to stay” and that many countries across the globe are hungry for functioning currencies, which shows there is a market for digital currencies. He is, however, skeptical about cryptocurrencies’ ability to rival the dollar or other hard currencies.While the U.S. CFTC is yet to adopt blockchain technology to better oversee financial markets, the financial watchdog has won its first Bitcoin fraud action. A  New York federal court has ordered Gelfman Blueprint and its CEO Nicholas Gelfman to pay over $2.5 million in civil monetary penalties and restitution over their +$600,000 Ponzi scheme.Related Reading: CFTC Chair: Cryptocurrencies Have a Future, They Are Here to StayFeatured image from Shutterstock.

Thailand Revenue Department Turns to Blockchain in Tax Evasion Probe

Thailand’s Revenue Department is planning to leverage blockchain technology and artificial intelligence to crack down on tax evasion, improve tax filing and refunds.


Tracking Defaulters Using New Technologies

The revenue department of Thailand is planning to adopt new technologies like blockchain and machine learning for probing cases of tax evasion according to the chief of the department.

The development was reported earlier by Bangkok Post. Ekniti Nitithanprapas, Director General of the department, said that blockchain technology would be used to monitor whether the tax had been paid correctly and to speed up the refund process.

According to Nitithanprapas, the agency also plans to leverage machine learning to gain an understanding of how taxes were being evaded and enable revenue officials to track such cases and create transparency.

The official had earlier mentioned that adoption of new technologies like blockchain and big data to digitize the tax collection process were high among his priorities.

Blockchain Friendly Thailand

Blockchain Friendly Thailand

Thailand has emerged as one of the most blockchain and crypto friendly nations around the world. The country has been quick to realize the potential of the technology and the economic benefits it can bring.

To attract start-ups planning to raise fund through ICOs, Thailand earlier in July put in place ICO regulations. The government has also legalized seven cryptocurrencies – Bitcoin, Ethereum, Bitcoin cash, Ethereum classic, Litecoin, Ripple, and Stellar.

The country’s financial regulator, Securities and Exchange Commission (SEC), has been vigilant in ensuring compliance to laws and keeping the Thai investors informed about the non-compliant firms and ICOs.

The government is not only keen to encourage investment in the country but is also eager to embrace blockchain technology. The Bank of Thailand had earlier announced its intention of using distributed ledger technology to develop and issue their own Central Bank Digital Currency (CBDC).

The project has been named as “Inthanon” and it is expected that the first phase would be completed by the first quarter of next year.

Earlier last week Live Bitcoin News has reported about how the government of Azerbaijan intends to use blockchain for housing and utilities. Dubai is another city that is fast moving in the direction of becoming the first blockchain powered city in the world.

What are your thoughts on the use of blockchain for monitoring of tax compliance? Let us know in the comments below.


Images courtesy of thairath.co.th, Shutterstock

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