CFTC Chairman Sees "Explosion of Interest in Cryptocurrencies"

The US Commodity Futures Trading Commission is anticipating a wave of new applications from companies attempting to become federally-regulated clearinghouses after an “explosion of interest in Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term,” according to a testimony to the US House Agriculture Committee delivered by CFTC Chairman J. Christopher Giancarlo earlier this week.

Thank you for the opportunity to testify today. These are indeed crucial steps for @CFTC. https://t.co/ArUmsYRrtz

— Chris Giancarlo (@giancarloCFTC) May 2, 2019

Giancarlo also said that as they continue to grow more complex, the clearinghouses his agency regulates are “critical single points of risk in the global financial system.”

Clearinghouses are financial institutions that are responsible for facilitating transactions between any two entities. They act as intermediaries that ensure trust on both ends of the transactions. The CFTC’s job is to examine these clearinghouses closely to identify possible problems that may impair the clearinghouse’s ability to do their job.

More Clearinghouse Applications Are Anticipated

Giancarlo not only said that “the importance of these examinations to overall financial stability are all increasing,” but that the CFTC is likely to soon have more clearinghouses under its jurisdiction.

“The Commission anticipates new applications for clearinghouse registration resulting from the explosion of interest in cryptocurrencies; an area in which protection of the cryptocurrencies will be one of the highest risks,” he said. The CFTC already regulates many clearinghouses within the US, as well as six located overseas.

Cryptocurrency platform ErisX is one of the crypto-related platforms currently seeking approval to become a CFTC-regulated clearinghouse; crypto derivatives firm LedgerX has already achieved clearinghouse status.

Giancarlo also mentioned LabCFTC, the Commissions’ fintech research group. He said that Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term and crypto were two important aspects of “rapidly changing markets and technological developments” that the research group has been able to help the CFTC anticipate and understand.

Additionally, the group’s work helped the CFTC “to determine the value of technological innovations,” including “crypto-asset-based futures products.”

As the bear market raged throughout 2018 and early 2019, many investors saw crypto futures products as an alternative to cryptocurrency investing and spot trading. CME and Cboe were the first two platforms to offer crypto futures in late 2017; since then, a growing number of platforms have joined them, including ErisX, LedgerX, Bakkt, and others.