In a recent interview with Forbes, the CFTC’s Chief Innovation Officer and inaugural director of LabCFTC, Daniel Gorfine, discussed important issues pertaining to the blockchain and crypto industry, including topics ranging from the importance of collaborating with innovators to the obstacles faced by regulators in the industry.
There has never been as much need for common sense regulation within the cryptocurrency industry as there is now, and this is mainly due to the surging popularity of the cryptocurrency industry. Fraud and scams are becoming a major problem for the industry, and common-sense regulatory frameworks can change this.
Cooperating with Industry Leaders and Innovators is Very Important to LabCFTC
Many people see the US CFTC as the greatest ally to the crypto industry within the US government, mainly due to their well-balanced, respectful, and consistent approach towards advocating for common sense industry regulations. The regulatory agency is continuing to take steps to work with innovators and industry leaders in an effort to develop beneficial regulatory policies, and the creation of LabCFTC was the first step towards incubating good relations with industry leaders.
While answering a question regarding feedback from innovators, Gorfine explained that innovators in emerging industries, like the crypto and blockchain industry, are incredibly willing to work with regulatory authorities, like the CFTC, to develop better regulations for the industry.
Gorfine explained LabCFTC’s interactions with innovators, saying:
“We’re starting see more granular questions and next level of engagement on certain models. I will add that we started getting, around the later part of last year, questions around CFTC jurisdiction in the virtual currency space, and that’s a big reason why we published the virtual currency primer that we did last October.”
Gorfine also explained to Forbes that the regulatory agency has not yet encountered many challenges when it comes to implementing regulatory measures for the crypto industry. He partially attributes this fact to good leadership, starting with CFTC Chairman Chris Giancarlo, saying:
“We haven’t faced a lot of barriers per se because I think there’s such a clear recognition from an agency perspective to be keeping pace and make sure that we have the right tools and understanding to be able to regulate where our markets are moving. So from an internal perspective, we’ve had a lot of support, and I think it starts with CFTC Chairman Chris Giancarlo…When you have the support of leadership, that goes a long way.”
Many in the crypto community see Giancarlo as a sort of crypto hero, as he advocated for a “do-no-harm” approach from the US government in front of the SEC chairman. Importantly, Gorfine concludes that that the regulatory group has been very successful so far, saying:
“I think we’ve been able to accomplish a lot of what we wanted to, and where we couldn’t, we’ve been able to say ‘Hey, here are some areas we can at least identify that we feel we have some limitations.’”
Gorfine Feels that a Regulatory Sandbox is “worth exploring”
The idea of developing a regulatory sandbox for the blockchain and crypto industry has become increasingly popular following the recently released US Treasury Fintech report, which advocated for this type of approach for the crypto/blockchain industry. Gorfine explained to Forbes that he feels this could be a good regulatory approach to the cryptocurrency industry, saying that, “In my view, the concept of a sandbox is but one tool that regulators may have at their disposal to interact with emerging technologies and innovation.”
Arizona recently became the first US state to launch a sandbox in an effort to drive more companies into the state, but this only affects state regulatory laws, and companies located there still have to abide by federal laws. Although this could be a great way for the federal government to encourage safe industry growth, Gorfine doesn’t think it should considered as a “be all end all” way to regulate the industry. On this he said:
“My one caveat is that it can be dangerous to view a sandbox as a panacea and the be all, end all way that you’re supposed to engage with fintechs and emerging technologies. I think there are a lot of other tools that regulators need to be thinking about, such as direct engagement with innovators and market participants, innovation competitions designed to stimulate creative application of new models and technologies, and having research and testing authority so that we can work to develop proofs of concept to better understand how technologies could impact us or our markets.”
In a time where the markets are consumed with potential regulatory measures coming from the US government, it is encouraging that the people heading these organizations are willing to collaborate with industry leaders, and to look at somewhat unconventional regulatory measures, like sandbox environments.
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