In a keynote address at an event held by the Cato Institute, CFTC Commissioner J. Christopher discussed the policy implications of crypto-currencies as well as focused on bitcoin’s underlying blockchain technology.

“The technology of distributed ledgers often referred to as the “blockchain,” [is] an emerging technology that may have enormous implications for the capital and hedging markets overseen by the CFTC and other regulators”, Giancarlo said.

He said that distributed ledger technology (DLT) or blockchain is likely to have a broad impact on global financial markets in payments, banking, securities settlement, title recording, cyber security and trade reporting and analysis.

Calling the technology as “golden record”, Giancarlo said that he believes that if regulators, during the financial crisis of 2008, had access to a real-time distributed ledger, they may have been able to identify anomalies in market-wide trade activity and diverging counterparty exposures indicating heightened risk of bank failure.

“It would certainly have allowed for far prompter, better-informed, and more calibrated regulatory intervention instead of the disorganized response that unfortunately ensued”, he added. “Moreover, had Lehman still failed, records powered by DLT and held by trading counterparties (and available to regulators) would have accurately shown Lehman’s open positions across asset classes. Imagine if, instead of requiring countless legal actions spanning eight years, we could have known all of Lehman’s exposures within minutes of its bankruptcy filing. Accelerated settlement of open positions and accounts could have taken weeks, not years”.

He further noted the recently announced successful trial of blockchain technology and smart contracts to manage post-trade lifecycle events for standard North American single name credit default swaps (CDS) conducted by seven firms (the Depository Trust & Clearing Corp. (DTCC), Bank of America, Credit Suisse, J.P. Morgan, Citigroup, financial service provider, Markit, and blockchain technology developer, Axoni).

“Tests like this one prove there is merit to the promise of potential DLT applications. Similarly promising projects are underway”, Giancarlo added.

He pointed out that rules regarding DLT are currently almost non-existent (and likely years away) and urges for the adoption of the “Do No Harm” regulatory model (the approach to the early internet).

““Do no harm” was unquestionably the right approach to development of the Internet. Similarly, “do no harm” is the right approach for DLT”, he said. “I look forward to working with my fellow CFTC commissioners, U.S. lawmakers and other financial services regulators here and abroad to develop a “do no harm” framework from which to launch a new era of innovation in distributed ledger technology – for the good of our markets, the jobs they support and the people they serve”.