Technology behind bitcoin, the blockchain, involves complex knowledge of cryptography and software engineering. In order to fully understand decentralization concepts and consensus mechanisms, the CFTC had to look towards its advisory committee.
The Technology Advisory Committee of the regulatory body of the futures and options markets of United States, Commodity Futures Trading Commission (CFTC), recently held a meeting in which crypto regulations and the distributed-ledger technology (DLT) were discussed. The meeting discussed reports which covered topics from blockchain consensus mechanisms to the current state of blockchain and crypto regulation in the U.S., Switzerland, Malta and others. The aspect of CFTC’s guidance for further development and adoption of DLT was also brought under consideration. Since blockchain is complex as it is, the regulatory body is trying to understand the technology so that better regulatory steps can be taken for the crypto world. But is there a need for crypto regulations and how these regulations can help drive its adoption?
CFTC is an independent body of the government of the United States that regulates the futures and options markets in the country. The role of this body is to stop fraudulent and malicious activities in the futures trading market. The role of its Technology Advisory Committee is to enlighten the committee with complex technical knowledge so that the regulatory body can form better laws and regulations regarding tech markets. And when it comes to the highly unregulated market of crypto, things get a lot complicated with technology like blockchain under consideration.
Crypto world is highly unregulated at the present moment. Due to the absence of regulatory clarity, scams in the form of Initial Coin Offerings (ICO) have ripped a lot of investors. Because of the crypto world being unregulated, illegal and malicious activities have seeped into this space making it highly unattractive for the investors and the general public.
The lack of regulations has stopped the growth of the crypto market at an institutional level. It is also one of the reasons why an exchange-traded fund (ETF) is not being approved by the United States Securities and Exchange Commission (SEC). The main role of SEC is to provide a fabric of safety to the investor community in the country. Unless regulatory clarity is there for the crypto market, it is highly unlikely that SEC will grant approval of a crypto-linked ETF.
As stated by the co-founder of Morgan Creek Digital, Jason Anthony Williams, while talking to BlockPublisher:
I don’t think ETF is as big as regulatory clarity. And they probably happen around the same time because I think part of the ETF issue is the regulatory clarity.
If an ETF gets established, it will attract a huge amount of institutional investment into this space as an ETF provides the investor community with an intermediary fabric through which they can safely interact with the volatile and risky world of cryptos. This is the reason why crypto regulation carries so much significance for the crypto world.
Distributed-ledger technology (DLT) is a way to store information in a decentralized way. Blockchain is DLT with the feature that it stores information in the form of blocks in a sequence. The entire crypto world is based on this technology. Bitcoin is one of the biggest use-cases of blockchain. Bitcoin presents the world with an alternate model of decentralized currency and challenges the traditional banking system. CFTC and the SEC are trying to understand blockchain so that better regulatory steps can be taken regarding bitcoin and crypto world, giving investors the protection they need.
Despite the need for regulations, the sentiment regarding it in the blockchain space is mixed. While some believe it is necessary to attract investors and the general public towards this space, others are of the view that it might hinder the innovation in this space by putting restraints. As stated by the well-renowned crypto analyst Joseph
India, being the leading recipient of the world remittances, must have acrypto market but overregulation is killing the market, burying thepotential in India to emerge as more prosperous in the dept.
Both the regulatory bodies, CFTC and SEC, need to be very careful and wary of the regulations that they come up with for this technology so that there is no suffocation of innovation.