The SEC and CFTC Join in Signing IOSCO Multilateral Memorandum of Understanding on Cross Border Enforcement

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have both signed the IOSCO Enhanced Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (EMMoU). The announcement comes following the 44th Annual International Organization of Securities Commissions (IOSCO) Conference which took place last week in Sydney, Australia. The EMMoU seeks to boost cross-border enforcement amongst the IOSCO members.

IOSCO is the international forum that brings together the securities regulators from around the world to discuss and coordinate on issues of mutual interest. IOSCO works both with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda.

During the Sydney meeting, participants engaged it a wide variety of topics impacting the securities industry today.  Topics addressed, “What is the role of securities regulators in sustainable finance?” Or “Are regulators agile enough in the face of rapidly evolving Fintech innovation?”

The EMMoU builds upon a previous MMoU signed by 123 regulators in 2002. Both the CFTC and the SEC were signatories of that document as well. The predecessor document is viewed as the “benchmark for cross-border cooperation in enforcement.”

In the past 17 years, things have changed in global markets. Signatories of the EMMoU  have agreed to “new forms of assistance critical to effective enforcement, such as obtaining compelled testimony and obtaining asset freezes to protect customer funds, among other powers.”

SEC Chairman Jay Clayton who attended the IOSCO event stated:

“As investment products, services and markets evolve, it is critical that the international community of securities and derivatives regulators continue to cooperate to protect investors from bad actors perpetrating fraud across borders. The SEC took an active role in negotiating and drafting the EMMoU with the intent of building upon the tremendous success of the MMoU in facilitating international cooperation. This signing demonstrates the SEC’s continued strong commitment to combatting securities and derivatives fraud against American investors – including fraud which is carried out outside our borders.”

CFTC Chairman J. Christopher Giancarlo, who was also in attendance, added:

“The CFTC is proud to be part of the inaugural group of signatories to the EMMoU and to demonstrate its commitment to international enforcement cooperation. In today’s world of rapidly evolving technology and increasingly global financial markets, securities and derivatives violations frequently involve cross-border misconduct.  As a result, effective enforcement requires that regulators around the world ensure that they are able to cooperate fully with their regulatory counterparts to ensure that investors are protected, markets are safeguarded and wrongdoers are held accountable.”

What are the key new EMMoU powers?

The additional key powers that IOSCO has identified as necessary to ensure continued effectiveness in safeguarding market integrity and stability, protecting investors and deterring misconduct and fraud include:

  • To obtain and share Audit work papers, communications and other Information relating to the audit or review of financial statements
  • To Compel physical attendance for testimony (by being able to apply a sanction in the event of non-compliance).
  • To Freeze assets if possible, or, if not, advise and provide information on how to Freeze assets, at the request of another signatory
  • To obtain and share existing Internet service provider (ISP) records (not including the content of communications) including with the assistance of a prosecutor, court or other authority, and to obtain the content of such communications from authorized entities.
  • To obtain and share existing telephone records (not including the content of communications) including with the assistance of a court, prosecutor or other authority, and to obtain the content of such communications from authorized entities.

Additionally, The EMMoU envisages the obtaining and sharing of existing communications record held by regulated firms.

US CFTC Signs Fintech Agreement with Australian Securities and Investment Commission

The US Commodity Futures Trading Commission (CFTC) and the Australian Securities and Investments Commission (ASIC) have signed a Fintech agreement to support innovations in finance and to share information within their respective jurisdictions.

This is the second such agreement for the CFTC, a US regulatory agency that has been at the forefront of embracing Fintech disruption. The first agreement was with the UK Financial Conduct Authority.

ASIC has now entered into 15 Fintech cooperation agreements.

According to the agreement, the CFTC’s LabCFTC and ASIC’s Innovation Hub will join in encouraging emerging innovations including Regtech. The partnership also facilitates referrals of Fintechs interested in entering the others’ market.

CFTC Chairman J. Christopher Giancarlo said the signing of the agreement advances their mutual interest in facilitating technological innovation.

“This arrangement will encourage the development of emerging financial and compliance technologies and continue to enhance global awareness of the critical role of regulators in 21st century digital markets.  I am pleased to announce the signing of this arrangement on the occasion of the CFTC’s first Fintech conference, Fintech Forward 2018: Innovation, Regulation and Education.”

ASIC Chair James Shipton added that his agency was delighted to partner with the CFTC while the two entities encourage Regtech and Fintech in the two countries:

“Technological changes are continuing to reshape financial services, markets and the regulatory landscape.  Today’s arrangement assists innovative businesses to grow across borders and allows for greater information sharing and cooperation by the two regulators.”

ASIC’s Innovation Hub was launched in March 2015 and LabCFTC in May 2017.

To date, the Innovation Hub has supported over 300 businesses and authorised over 60 Fintech businesses.

LabCFTC has engaged with over 200 entities and organizations since its launch last year and published a request for public input on potential innovation competitions.

“The Case Will Proceed to Trial”:  Taking the RECoin / Diamond & Other ICO Actions One Step at a Time

As has been reported widely, digital token sales (sometimes referred to as initial coin offerings or ICOs) arguably are becoming increasingly important as a new form of capital raising.  To date, certain regulators (including the U.S. Securities and Exchange Commission (the “SEC”)) have provided ongoing guidance (including through enforcement actions, speeches and market educational materials) warning that sales of digital tokens to U.S. persons in ICOs are exceedingly likely to be sales of investment contracts and, hence, sales of securities.

While many predict coming waves of ICO-related litigation, thus far, relatively few U.S. courts have weighed-in about some of the most fundamental questions relating to digital token sales.

Perhaps for that reason, among others, when courts do address certain token-related questions, headlines are made.  Many in the crypto and legal communities, understandably, are eager for answers.  It is critical, though, that when analyzing judicial guidance, we, collectively, remember the procedural posture, or “stage,” of a given action and listen closely to what is said – and what is not (yet) said – by the court.

The Zaslavskiy Order:  Denial of a Pre-Trial Motion to Dismiss

Earlier this week, on September 11, 2018, the United States District Court for the Eastern District of New York (the “Court”) issued a Memorandum and Order (the “Zaslavskiy Order”) concerning The United States of America vs. Maksim Zaslavskiy, one of the more prominent ICO-related actions.  While the Zaslavskiy Order arguably provides important guidance to token sellers, other market participants and their lawyers, it is critical to recognize that the Court did not determine that Maksim Zaslavskiy’s (“Zaslavskiy”) token sales were sales of securities.  Rather, the Zaslavskiy Order denied Zaslavskiy’s pre-trial motion to dismiss a criminal indictment and determined that “[t]he case will proceed to trial.”

Basic Background

In 2017, the SEC and, later, the United States Department of Justice (the “DOJ”) each filed an action against Zaslavskiy, alleging securities fraud in connection with two ICOs, one relating to diamonds and one relating to real estate.  In early 2018, Zaslavskiy filed a motion to dismiss both the criminal indictment, and the SEC’s enforcement action, where he is represented by Jason Nagi of Polsinelli, PC.  The motions asked the Court to consider:  “(i) whether the securities laws are appropriately applied to cryptocurrencies; (ii) whether Zaslavskiy’s token sales constitute “investment contracts” under the test articulated in SEC v. W.J. Howey Co., 328 U.S. 293 (1946); and (iii) whether the securities laws are void for vagueness as applied to cryptocurrencies and token sales.”

In the Zaslavskiy Order, the Court denied Zaslavskiy’s pre-trial motion to dismiss, stating, “Because the Indictment is sufficient under the Constitution and the Federal Rules of Criminal Procedure, and because the law under which Zaslavskiy was charged is not unconstitutionally vague as applied, Zaslavskiy’s motion is denied.”

Whether an Investment Contract Exists Is a Question of Fact

While some have reported, and others may believe, that the Court determined that Zaslavskiy’s token sales were sales of securities, the Court did not do so.  In fact, to the contrary, in the Zaslavskiy Order, Judge Dearie provided a reminder that the question of whether the token sales were sales of securities are factual ones to be determined based on evidence presented at trial, as well as that the so-called Howey test – an over 70 year old test used to determine whether something is an investment contract (and, hence, a security) – is a facts-and-circumstances test.  As stated in the Zaslavskiy Order:

“The subsidiary question of whether the conspirators in fact offered a security, currency, or another financial instrument altogether, is best left to the finder of fact—unless the Court is able to answer it as a matter of law after the close of evidence at trial. Nevertheless, the parties engage in a spirited debate that is undoubtedly premature. The Court has been treated to a volley of cases decided in the civil arena, which may well be instructive at the appropriate time but do not inform us as to whether the Indictment itself is fatally flawed. The parties also encourage the Court to evaluate documents and evidence outside of the four comers of the Indictment, which we decline to do[….] Despite the parties’ attempt to cast, this issue as one related to the Indictment’s facial sufficiency, they have instead asked us to resolve what can only fairly be a question of proof at trial, based on all of the evidence presented to a jury.  Zaslavskiy’s primary contention—that the investment scheme at issue did not constitute a security, as that term is defined under Howey, is undoubtedly a factual one. [….]  In any event, we briefly examine the parties’ exchange and confirm our conclusion that the Indictment calls for a trial on the merits.”

The Indictment Was Facially Valid

In the Zaslavskiy Order, the Court determined that the Indictment was facially valid, in other words, that it “satisfies the demands of due process and gives the defendant clear notice of the charges against him.”  The Court also found that, if the allegations set forth in the Indictment were proven at trial, a reasonable jury could conclude that the token sales satisfied the Howey test and, therefore, were sales of investment contracts.  Judge Dearie clarified further, “However, the ultimate fact-finder will be required to conduct an independent Howey analysis based on the evidence presented at trial.”

The Law under which Zaslavskiy Was Charged Is Not Void for Vagueness As Applied

The Court also concluded that the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 thereunder are not unconstitutionally vague (“void for vagueness”) as applied.

Noting that Zaslavskiy contended that U.S. securities laws are void for vagueness as applied to cryptocurrencies, the Court stated, “Whether or not the investments promoted in the REcoin and Diamond are cryptocurrencies is beside the point at this stage. The question is whether the law under which Zaslavskiy is charged is unconstitutionally vague as applied to his conduct, as it is described in the Indictment. It is not.”

Among other things, the Court determined that Zaslavskiy had failed “to demonstrate that a person of ordinary intelligence would not have sufficient notice that the charged conduct was proscribed.”

Notably, in support of the Court’s statement that “[T]he abundance of caselaw interpreting and applying Howey at all levels of the judiciary, as well as related guidance issued by the SEC as to the scope of its regulatory authority and enforcement power, provide all the notice that is constitutionally required,” the Court’s citations included the SEC’s 21a Report concerning The DAO, as well as recent guidance by SEC Chairman Jay Clayton and CFTC Chair J. Christopher Giancarlo published in The Wall Street Journal.

This is a potentially critical take-away for token sellers and other crypto market participants.

Market Participants and Their Lawyers Arguably Have Notice that U.S. Securities Laws Apply to Token Sales to U.S. Persons

To-date, the SEC and other regulators have made numerous public statements concerning digital tokens.  It is incredibly important that those in the crypto space, and their lawyers, be aware of and heed the warnings and continued guidance provided by the SEC.  As was the case in the Zaslavskiy Order, courts may conclude that the public has been provided constitutionally sufficient notice about the applicability of certain U.S. laws (including U.S. federal securities laws) to digital token sales.  In other words, ignorance of such laws (or their applicability to ICOs) will not excuse failure to comply with them.

While the Court determined that, given the factual nature of the inquiries, the “spirited debate” about whether token sales were sales of securities was “premature,” some may find it heartening to know that such debates are taking place.  Indeed, many believe that, in these early crypto cases, it is particularly important that parties be represented by litigators who truly understand both the digital token space and the relevant regulatory guidance.  The ultimate verdict in the Zaslavskiy case has not yet been determined, and, as the Court noted, “[T]he case will proceed to trial.”

Joshua Ashley Klayman is one of the best known blockchain and crypto currency lawyers in the world. Ms. Klayman is the Founder and Managing Member of Klayman LLC, a boutique blockchain-focused law firm, and the Founder and CEO of Inflection Point Blockchain Advisors, LLC, a boutique strategy consulting firm.  Active in the blockchain community, Ms. Klayman chairs the Wall Street Blockchain Alliance’s Legal Working Group and frequently speaks and publishes about blockchain technology, smart contracts, cryptocurrency and tokens sales (initial coin offerings), among other topics.  Klayman’s clients have included investment banks, other financial institutions and issuers (including token sale issuers); private equity, venture and hedge funds and their portfolio companies; major publicly traded organizations and emerging companies. A mother of five, she is a passionate advocate for the promotion of women and other underrepresented groups and is a founding member of Diversity in Blockchain, Inc. and Collective Future.

¹This article is not intended to be, and should not be relied upon as, legal advice or investment advice.  The views expressed are the author’s own and may not necessarily represent the views of her employer or any other natural person or entity.  In addition, the author is not a litigator.
²“Shortly after the launch of the Diamond “IMO,” on September 29, 2017, the SEC filed a complaint against Zaslavskiy alleging (i) that both the REcoin ICO and the Diamond IMO were unregistered offerings of securities; and (ii) that Zaslavskiy made a series of false and misleading statements in connection with both token sales.  On November 21, 2017, Zaslavskiy was indicted for substantially the same conduct as alleged in the SEC Complaint.  On January 31, 2018, the SEC action was stayed pending resolution of the DOJ’s action.” Goodwin, U.S. v. Zaslavskiy: DOJ and SEC Coordination in Enforcing the Securities Laws over Token Sales, Blog, Digital Currency Perspectives (April 26, 2018), available at
 4 “[….] see also, e.g., SEC Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO. SEC Release No. 81207, 2017 WL 7184670, at *9 (“automation of certain functions through [distributed ledger, blockchain, smart contracts, or computer code] technology…does not remove conduct from the purview of the U.S. federal securities laws”); Jay Clayton and J. Christopher Giancarlo, Regulators are Looking at Cryptocurrency, Wall St. J., Jan. 24, 2018, available at https://www.wsi.coni/articles/regtilators-are-looking-at-cryptocurrency-1516836363 (“some products that are labeled virtual currencies have characteristics that make them securities”); Public Statement of SEC Chairman Jay Clayton on Cryptocurrencies and Initial Coin Offerings, Dec. 11. 2017, available at 1 (“simply calling something a ‘currency’ or a currency-based product does not mean that it is not a security.”).”  The Order at 20, available at

US Commodity Futures Trading Commission and Monetary Authority of Singapore Agree to Cooperate on Fintech Innovation

The US Commodity Futures Trading Commission (CFTC) and the Monetary Authority of Singapore (MAS) has signed an agreement to collaborate on Fintech innovation. MAS has signed many of these types of agreements over the past several years. The CFTC is unique in the US as a regulator due to its forward thinking approach to Fintech. This is their second type of international agreement on Fintech and first in Asia. The signing of the agreement coincided with a visit by CFTC Chairman J. Christopher Giancarlo to Singapore. Additionally, the CFTC is expected to directly participate in the forthcoming Fintech Festival in Singapore – an annual gathering that engages thousands of participants from around the world.

The “Fintech Arrangement” focuses on information sharing on Fintech market trends and developments. This is said to include sharing insights derived from each authority’s relevant Fintech sandbox, proofs of concept, and innovation competitions. The Fintech Arrangement also facilitates referrals of Fintech companies interested in entering the other’s market.  The two entities expect this to help Fintech companies better understand and navigate the regulatory regime and capitalize on opportunities in each jurisdiction.

CFTC Chair Giancarlo commented on the signing of the agreement;

“I am delighted to join Ravi Menon in signing this arrangement to demonstrate our mutual commitment to facilitate market-enhancing innovation and share best practices in FinTech engagement. I have long admired Ravi and MAS’ leadership in facilitating FinTech innovation and development in Singapore and thinking about how FinTech can be applied to make financial markets more effective in supporting economic growth. By collaborating with MAS’ FinTech & Innovation Group, the CFTC, through LabCFTC, can continue to enhance global awareness of the critical role of regulators in 21st century digital markets. The arrangement we signed today expands the opportunity for the CFTC to build upon our strong relationship with the MAS and enhance communication with innovators in Asia. We are further looking forward to having LabCFTC participate at the Singapore FinTech Festival 2018.”

Menon, Managing Director, MAS, said the CFTC is a highly reputed and progressive regulator with whom MAS has had a close relationship.

“This arrangement is a significant step forward in our joint commitment to grow the FinTech landscape. We have seen increasing interest from FinTech firms in the US to expand to Asia. Through this cooperation arrangement, we hope to create more opportunities for firms in both jurisdictions, especially in developing innovative business models for the derivatives market.  I am also delighted that CFTC will participate in the Singapore FinTech Festival 2018, and contribute to the discussions on applied technologies in capital markets.”

Fintech Forward: US CFTC to Hold Conference at DC HQ in October

The Commodity Futures Trading Commission (CFTC) has announced that registration is open for their forthcoming Fintech focused conference. Scheduled to take place at CFTC HQ in Washington, DC, on October 3-4, FinTech Forward 2018: Innovation, Regulation and Education, is an effort to bring together policy makers, Fintech innovators and the general public to discuss the changes taking place within the financial services industry. The conference is expected to address crypto assets, Regtech, AI/machine learning and more. The conference is being orchestrated by the relatively new CFTC LabCFTC along with the Customer Education and Outreach (OCEO) branch of the CFTC.

CFTC Chairman J. Christopher Giancarlo said the collaboration by the Commission is part of their “multi-pronged approach to keeping pace with a rapidly changing market.”

“LabCFTC has actively and effectively executed on its mission of facilitating market-enhancing innovation and helping to inform policy over the past year, and the Office of Customer Education and Outreach continues to pursue opportunities to educate customers in our markets across all asset classes.”

Daniel Gorfine, Chief Innovation Officer and Director of LabCFTC, added;

“Having passed the one-year mark since the launch of LabCFTC, we are excited to advance thoughtful discussion regarding the increasingly significant role that technology is playing in financial markets and how regulators can keep pace with modern approaches and frameworks. We have met with hundreds of innovators and market participants across the country on a range of areas of innovation, and believe it is important to share key trends, themes, and insights.”

Erica Elliott Richardson, Director of the Office of Public Affairs and Office of Customer Education and Outreach, said the conference is in line with many of the CFTC efforts to keep market participants informed of new financial services.

Confirmed speakers and presenters include CFTC Chairman Giancarlo, who will deliver the welcome keynote, and U.S. Representative Austin Scott (GA-9), who will deliver remarks concluding the first day. Also invited are U.S. Representatives Jared Polis (CO-2), and Patrick McHenry (NC-10).

Participating regulators include staff from the Securities and Exchange Commission, the Federal Trade Commission, National Futures Association, Federal Reserve Board, Financial Industry Regulatory Authority (FINRA), and the UK’s Financial Conduct Authority (FCA).

FinTech Forward is also being held in support of World Investor Week, a global recognition of the importance of investor education and protection organized by the International Organization of Securities Commissions (IOSCO), in which the CFTC serves as a member.

CFTC Chair J. Christopher Giancarlo: “We are falling behind”

Yesterday, J. Christopher Giancarlo, Chairman of the Commodity Futures Trading Commission (CFTC), spent some time on Capitol Hill testifying in front of the House Committee on Agriculture.

While Giancarlo’s prepared remarks, and ensuing comments driven by questions from the Committee, covered a wide range of policy issues associated with the CFTC, Giancarlo also made some interesting comments pertaining to blockchain development and cryptocurrencies.

Within his prepared statement, Chair Giancarlo addressed their oversight of “virtual currencies.”

“The hearing last week before this committee examined the opportunities and risks involved in the evolution of digital currencies. Emerging financial technologies [Fintech] are taking us into a new chapter of economic history. They are impacting trading, markets, and the entire financial landscape with far ranging implications for capital formation and risk transfer. They are transforming the world around us, and it is no surprise that these technologies are having an equally transformative impact on U.S. capital and derivatives markets.

Knowing the challenges ahead, my focus as Chairman has been guided by six broad elements concerning virtual currency: (1) staff competency; (2) consumer education; (3) U.S. interagency cooperation; (4) exercise of authority; (5) strong enforcement; and, (6) heightened review of virtual currency product self-certifications.”

Giancarlo said the CFTC has been particularly assertive regarding enforcement actions and digital currencies. Similar to the SEC, the CFTC has an internal virtual currency enforcement task force to consolidate knowledge within the digital asset class. He highlighted several enforcement actions taken by the CFTC in recent months such as My Big Coin Pay and Entrepreneurs Headquarters Limited.

[clickToTweet tweet=”Similar to the SEC, the CFTC has an internal virtual currency enforcement task force to consolidate knowledge within the digital asset class” quote=”Similar to the SEC, the CFTC has an internal virtual currency enforcement task force to consolidate knowledge within the digital asset class”]

The Chair said his agency is “working closely with the SEC” and other federal agencies to pursue acts of fraud and malfeasance.

While emphasizing the CFTC’s enforcement chops, Giancarlo also pointed out to the Commission’s Fintech innovation efforts.

Giancarlo reviewed the fact that the CFTC has partnered with the UK Financial Conduct Authority (FCA), largely viewed as the gold standard when it comes to enabling innovation and competition in financial services, with a Fintech innovation arrangement.

“We believe that by collaborating with the best-in-class FCA Fintech team, the CFTC can contribute to the growing awareness of the critical role of regulators in 21st century digital markets.”

Lab CFTC, managed by Daniel Gorfine, has held 200+ meetings with both large and small innovative financial firms.

A consistent advocate of self regulation, Giancarlo said there is a subcommittee, part of the Technology Advisory Committee (TAC) at the CFTC that is “addressing questions surrounding virtual currency including suggesting self regulatory policies for trading platforms.” Led by CFTC Commissioner Quintez, Giancarlo expects some “robust” recommendations from the Committee in the coming months.

But during the Hearing, Giancarlo voiced his concern that the US is not well prepared, or doing enough, to foster an innovation driven financial sector. This is a concern that has been voiced from others, both inside the beltway and outside its policy bubble. The CFTC is apparently struggling to stay ahead of the global innovation curve.

According to statute, the CFTC lacks certain authority to work with innovative Fintech firms to trial and test new concepts. In a twist of legislative language, if the CFTC engages directly with a Fintech to research or test a service – this may be deemed receiving something of value without a formal procurement. In his prepared remarks, Giancarlo stated;

“The Commission would like the ability to partner, collaborate, or engage in a cooperative agreement regarding emerging financial and compliance technologies with persons or entities; Federal, State, or local agencies or instrumentalities; or foreign governments or international organizations. Legislation recently introduced by Congressman Austin Scott provides such authority and would greatly enhance the Commission’s ability to keep pace with emerging technology, explore its potential, and facilitate its adoption.”

There exists legislation today, the “Commodity Futures Trading Commission Research and Development Modernization Act” (HR 6121), that may address this regulatory shortcoming.

Asked how the bill will improve the CFTC, Giancarlo said he has been approached by some of the most interesting innovators in the space – especially in the areas of blockchain. He shared an example of multiple organizations coming together to experiment with a blockchain based trading platform, mentioning credit default swaps and bank payments.

Giancarlo said they were invited to join in the project;

“Hey CFTC, why don’t you participate in this proof of concept [PoC]?” – Giancarlo said they asked.

The collaboration would include an embedded team from the CFTC to observe. Giancarlo speculated about a CFTC node being created in the blockchain where the Commission could monitor all of the activity – the Holy Grail of Regtech. But the CFTC is barred from this type of participation within the private sector.

No Gifting to the CFTC Allowed

The bill would now allow the CFTC to participate in these types of proof of concept projects so they can learn and, hopefully, become better prepared for the digital future of finance.

Posing a rhetorical question in response to a query from Representative Scott, Giancarlo asked why is this so important?

“Because we are falling behind,” Giancarlo stated.

“Just two days ago, the Bank of England announced that they are putting in a new bank to bank payment system in the UK and it’s going to be blockchain compliant … they have had the last four years, under what they call project innovate, to participate in all of these blockchain beta tests that we have not been able to participate in.”

“I feel like we are four years behind…”

Giancarlo said first he wants to understand how things work before there is any type of appropriation action to invest into a new, potentially blockchain powered, system.

The financial services sector is a global market yet regulatory jurisdictions are largely established by national boundaries. Understanding the need to compete on a global level in financial services would help with any legislation, or regulatory action, that may be focused on domestic need but inevitably may impact, perhaps negatively, international activity.

The video of the hearing is below.



CFTC Chair Giancarlo Budget Request References Oversight of Virtual Currencies & Fintech

U.S. Commodity Futures Trading Commission (CFTC) Chair J. Christopher Giancarlo testified before a Senate subcommittee today to review the Fiscal Year 2019 funding requests and budget justifications for the CFTC, alongside U.S. Securities and Exchange Commission Chair Jay Clayton. Giancarlo requested a “modest increase” in his agencies budget that is “necessary to fulfill the CFTC’s statutory mission.”

Within his prepared testimony, Giancarlo referenced Fintech and the oversight of virtual currencies.

Regarding virtual currencies, Giancarlo stated;

“In FY 2018, certain exchanges self-certified several new contracts for futures products for virtual currencies. These innovations impact the regulatory landscape and with this budget request, the Commission will invest more in new technologies and tools that support important surveillance and enforcement efforts.”

Giancarlo mentioned the need to ensure virtual currency products were not susceptible to manipulation and fraud. He also commented on a recent staff advisory regarding exchanges and clearinghouses that provides guidance for virtual currency derivative products

“It clarifies CFTC staff’s priorities and expectations in its review of new virtual currency derivatives to be listed on a designated contract market or swap execution facility, or to be cleared by a DCO. The advisory should help exchanges and clearinghouses effectively and efficiently discharge their statutory and self-regulatory responsibilities, while keeping pace with the unique challenges of emerging virtual currency derivatives.”

In discussing Fintech, Giancarlo referenced the LabCFTC and their coordination with the UK Financial Conduct Authority – recognized as the leading regulator globally when it comes to empowering Fintech innovation.

While his comments were not limited to innovative finance and covered a wide spectrum of issues, his pursuit of managing a 21st century financial services sector was made clear;

“This is the first Fintech innovation arrangement for the CFTC with a non-U.S. counterpart. We believe that by collaborating with the best-in-class FCA Fintech team, the CFTC can contribute to the growing awareness of the critical role of regulators in 21st century digital markets,” said Giancarlo.

SEC Chair Jay Clayton & CFTC Chair J. Christopher Giancarlo to Testify Before Senate Committee On Appropriations Subcommittee on Budget Requests

CFTC Chair J. Christopher Giancarlo and SEC Chair Jay Clayton will be visiting Capitol Hill together once again to testify before a Senate Subcommittee. This time, Clayton and Giancarlo will be testifying before the Senate Committee On Appropriations Subcommittee on Budget Requests, tomorrow (June 5, 2018) at 330PM. The hearing will be presided by Chairman James Lankford.

The hearing has been scheduled to review the Fiscal Year 2019 funding requests and budget justifications for the U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission. Typically, in these hearings appointed officials are requested to justify their expenditures and requests. Members may also take the opportunity to ask questions regarding tangential topics, such as Fintech or the hot subject of cryptocurrency, so it may be worth a watch.

These hearings are live-streamed and made available on the Committee site.


[Editors Note: A previous version of this article referenced the incorrect subcommittee. We regret any confusion regarding the error]

CFTC Chair Giancarlo Applauds Operation Cryptosweep. Says “Virtual Currencies and Other Exponential Digital Technologies are Taking Us into a New Era”

On the same day the North American Securities Administrators Assocation (NASAA) announced “Operation Cryptosweep” – a coordinated enforcement action targeting fraudulent initial coin offerings (ICOs), Commodity Futures Trading Commission (CFTC) Chair J. Christopher Giancarlo delivered a speech to NASAA members. Within his prepared remarks, Giancarlo stated;

“We applaud NASAA on a new program [Operation Cryptosweep] being announced today. It complements the CFTC’s on-going virtual currency investigations with NASAA members.”

NASAA members from over 40 jurisdictions have participated in Operation Cryptosweep. To date,  approximately 70 inquiries and investigations and 35 pending or completed enforcement actions have been taken since the beginning of May. Additional enforcement actions  may be forthcoming – not to mention the many that took place prior to this month. In their defense, NASAA says that not every ICO is fraudulent but the group urges the public to remain vigilant regarding possible acts of fraud.

Giancarlo has become a favored regulator within the cryptospace. Following his testimony before the Senate Banking Committee this past February, cryptocurrency advocates rushed to compliment his balanced approach and respect for entrepreneurial innovation in the financial services industry. Unlike some other policy makers, Giancarlo has been hesitant to over-regulate and crush innovation in its infancy. This is not to say that the CFTC is not vigilant in its mission of rooting out fraud and monitoring the ICO marketplace. Quite the contrary. Vigilance against potential acts of fraud is vital to fostering a robust ICO ecosystem. The CFTC has consistently dealt with bogus ICOs but that is different from enabling change – even when change veers from established financial and regulatory norms.

The “Inexplicable Power of the Word”

In Chair Giancarlo’s speech, the regulator stated;

“As you may know, US futures exchanges and clearinghouses are self-regulatory organizations for the markets they operate.  As front-line regulators, they should be proactive, flexible and engage in heightened review of new virtual currency contracts and their oversight to ensure proper surveillance of the trading and clearing of these contracts given the risks. I believe that this advisory should help exchanges and clearinghouses effectively and efficiently discharge their statutory responsibilities as SROs, while keeping pace with the unique challenges of emerging virtual currency derivatives.”

But Chair Giancarlo added;

“One thing is certain: ignoring these changes in the market would be a profound mistake. They will not go away. We must be proactive in making a regulatory and statutory framework that is ahead of the curve, prevents and punishes fraud and criminality, gives clarity and coherence to these emerging technologies, and anticipates the evolution of new instruments such as virtual currencies. The same technology can give us advantages in market regulation. Our task, as market regulators, is to set and enforce rules that foster innovation while promoting market integrity and confidence.” (emphasis added)

[clickToTweet tweet=”‘One thing is certain: ignoring these changes in the market would be a profound mistake. They will not go away.’ #Blockchain #Cryptocurrency” quote=”‘One thing is certain: ignoring these changes in the market would be a profound mistake. They will not go away.’ #Blockchain #Cryptocurrency”]

Giancarlo said we are at a juncture of changing times thus indicating his belief that Bitcoin, ICOs, and other digital assets are here to stay. Unlike some other pundits or commentators, such as Nouriel Roubini (AKA Dr. Doom)  that believe cryptocurrencies are for “suckers” and “bullshit” or the legendary Warren Buffet who recently called Bitcoin “rat poison” – Giancarlo is ready to defend change and speak his mind.

“The world is indeed changing, moving into a virtual universe.  Language and ideas are being transformed,” stated Giancarlo. “Distributed ledgers, virtual currencies and other exponential digital technologies are taking us into a new era.”

While the news of the day may have been about the buzzy phrase Operation Cryptosweep, Giancarlo is looking to what happens after the scammers are flushed out, and an established digital assets marketplace gains its footing.

Joshua Klayman, Chair of the Wall Street Blockchain Alliance Legal Working Group and co-Chair of Morrisson Foerster global blockchain group, said that Chairman Giancarlo’s speech was important and timely.

“While he spoke about developing a framework of cooperation among regulators at the U.S. federal and state levels to better identify patterns of wrongdoing as well as aggressive prosecution of fraudsters and manipulators, his message arguably conveyed much more than just that,” said Klayman. “In his speech, Chairman Giancarlo described the CFTC as having “been at the regulatory horizon on virtual assets, especially with our criteria for heightened review of new virtual currency products” and mentioned a forthcoming CFTC staff advisory that would provide “guidance to exchanges and clearinghouses on certain enhancements when listing a derivative contract based on virtual currency.”

Klayman pointed to the fact that Giancarlo told listeners that many in the world look to the United States for leadership and guidance and that the American public expects a coordinated approach to regulatory oversight.  He spoke about the value of “best practices” that are “ahead of the curve, sensible and effective.”

“As I have said often, I believe that we are at a societal inflection point. In my personal view, Chairman Giancarlo’s acknowledgment that the world is changing and moving into a virtual universe, a new era ushered in by “blockchain, virtual currencies and other digital technologies,” seemed to strike a thoughtful tone that many in the blockchain and crypto space may welcome,” Klayman stated.

Yes, the world is watching as the U.S. is the leading market economy in the world. And it is “looking to the United States for leadership and guidance.” The U.S. cannot turn its back on innovation due to the intrinsic risk of the new to the detriment of an alternative finance future that may be beneficial.

That Chair Giancarlo understands this is clear, similar to SEC Commissioner Peirce’s call for thoughtful regulation of digital assets. Peirce recently stated regulators should “not let our lack of familiarity with the technology breed anxiety and therefore bad regulation.”  But, unfortunately, it is not certain his peers are as willing to embrace the crypto marketplace, competition, and the possible benefits of decentralization and digital assets that challenge the long established regulatory convention.

[clickToTweet tweet=”the world is watching. And it is looking to the United States for leadership and guidance #Cryptocurrency #Blockchain” quote=”the world is watching. And it is looking to the United States for leadership and guidance #Cryptocurrency #Blockchain”]

Hester Peirce Advocates for Thoughtful Regulation in Powerful LA Speech

Earlier this month Hester Peirce, a commissioner of the SEC, delivered a powerful speech in LA that bodes well for the future of cryptocurrency regulation. She addressed the challenges she faces as a regulator of the financial sector, and shared her own philosophy regarding initial coin offerings (ICOs).

Likening the role of a regulator to that of a lifeguard, Ms. Peirce described the role of the SEC as stepping in only when necessary, not watching the “sandcastle builder’s every decision.” She instead encouraged curiosity in the regulatory approach to ICOs, stating that the SEC “must put in the effort the learn about these new technologies.”

Ms. Peirce lamented the fact that “most of the communications from the SEC on the topic have come from our Division of Enforcement,” expressing her hope that constructive a dialogue will open and create a more hospitable regulatory environment. Ideally an updated set of regulatory guidelines will come in the near future to account for the novel aspects of blockchain based tokens.

Applying decades old rules written before the conceptualization of blockchain and the internet is inadequate for this new technology. I am encouraged, and so should project developers and market participants by Ms. Peirce’s thoughtful statements on the issue, as they portend a future of updated and effective regulatory policy, hopefully stamping out fraud while creating an environment for the technology to flourish.

Posing the question of how to “be a better lifeguard,” Ms. Peirce highlights the importance of viewing a token’s function when determining how to regulate ICOs. While cryptocurrencies can function like money or be viewed as a commodity, Peirce sees ICOs as most closely emulating securities.

Regarding ICO tokens Ms. Peirce highlighted that often “creator[s] sell them as a means of raising funds… before the environment is built.” So whether coins are used as a medium for exchange or as a way to track exchanges, the “proceeds from the sales of tokens are used to build the system in which they will one day function” which fundamentally changes their functionality from one of utility to that of a security.

Despite the logical conclusion that ICOs can function as securities Peirce cautions against “blanket designations for all ICOs” stating that “There is a risk, when something truly innovative comes along, that regulators will focus only on the harms the innovation may bring and entirely miss the opportunity it presents to improve people’s lives.”

While Ms. Peirce’s statements are thoughtful and indicate she is willing to adapt to new challenges posed by the technology she is only one of five on the commission. Sitting chair, Jay Clayton, has stated on record that he is yet to see an ICO that does not fall under the category for securities. Mr. Clayton believes that there may be a true utility token that would fall under regulations distinct from securities, but that there is yet to be an ICO in accordance with the not yet established category.

Even with the challenges the SEC faces regarding their ability to regulate this new asset class market participants should be optimistic. Ms. Peirce’s speech is the most promising to date from any regulator, highlighting the importance for the agency to “not let our lack of familiarity with the technology breed anxiety and therefore bad regulation.”

Ms. Peirce’s speech drew other regulators to the chorus of support for blockchain and digital assets, namely Chairman Chris Giancarlo of the Commodity Futures Trading Commission (CFTC).

On Twitter Mr. Giancarlo lauded the speech for its “superb thinking on token technology.” Hopefully, the Peirce and Giancarlo attitudes precipitate new thinking in the regulatory space among regulators.

The future of cryptocurrency regulation is bright, and market participants should expect positive steps towards facilitating innovation and eliminating fraud from the marketplace.


Jim Borzilleri is President and founder of CrowdEngine, a white label crowdfunding software provider. Using CrowdEngine’s software platform, companies can legally raise money from the general public with all services licensed and operated by CrowdEngine but made available to you and your customers under your domain and branding. CrowdEngine also provides an Initial Coin Offering solution for regulatory compliant token sales.  Borzilleri is a co-founding member of the Crowdfunding Professional Association (CfPA) and a software-as-a-service (SaaS) expert who brings over 20 years of business development and executive management experience to his role as President of CrowdEngine.

CFTC Chair Giancarlo Joins Chorus of Positive Comments on SEC Commissioner Peirce’s Speech on Cryptocurrency Innovation

Last week, SEC Commissioner Hester Peirce delivered a powerful speech that shared her views on the mission of regulators broadly, and cryptocurrency innovation specifically. The speech has been widely lauded in the crypto space as it has been viewed as supportive of the potential for blockchain disruption and the opportunity of digital assets created by initial coin offerings.

Yesterday, another erstwhile crypto enthusiast, CFTC Chair J. Christopher Giancarlo, called Commissioner Peirce’s speech “superb.”


Giancarlo has been welcomed by the digital currency world as his public pronouncements have been seen as keen on allowing crypto-innovation to bloom, while acknowledging that bad actors and fraud must be dealt with promptly. The crypto-love by the community has gone as far as labeling Chair Giancarlo the #BitPope or “the real Bitcoin Jesus.” In some ways, Giancarlo has become the leading standard bearer for the crypto-generation within the current administration. This may be contrasted by the rule making by enforcement action that has dominated the SEC of late.

Recently, there was a rumored meeting held between public officials seeking to determine how to best regulate Ethereum based offerings and the emergence of digital assets. It will be interesting to see if the Peirce / Giancarlo Paradigm that regulators should be hesitant to define cryptoassets as securities wins over the skeptics.


CFTC Chair Giancarlo Calls for Cross Border Regulatory Cooperation, Revisits Regulatory Reform 2.0 White Paper that Advocates Blockchain Utilization

Speaking in Berlin this week, Commodity Futures Trading Commission Chair J. Christoper Giancarlo addressed the Association of German Banks. His theme was the pressing need for regulatory harmonization.

Today, across developed markets, varying financial regulations adds a significant cost to the financial services industry. Same products and services offered in different countries must endure a plethora of rules and regulations that demand specialized knowledge within each jurisdiction. The cost to comply to national rules is inevitably passed onto the end users of each service. It simply makes sense to pursue regulatory harmonization to increase the value created by financial regulators.

Giancarlo stated;

“I am very aware that the rules and regulations adopted in the United States impact firms around the world, including financial institutions here in Germany.  Therefore, it is important that you know that I am committed to cross border regulatory harmonization … We need greater harmonization.  We also need to be consistent, reasonable, and cost-efficient.”

While complex and, at times, extremely arcane, a goal of coordinating rules to reduce the cost to consumers and businesses is an important objective. Giancarlo references the recently published CFTC white paper entitled “Regulatory Reform 2.0.” that specifically tackled Swaps. Revealed last month, buried within the document was the opinion that blockchain technology possesses powerful Regtech potential;

The CFTC white paper states;

“… should collaborate with other authorities to cultivate the development of “regulator nodes” on distributed ledgers [Blockchain]. The full potential of DLT in trade reporting is to transcend the fragmented regulatory structure by providing reference to a single, validated record of all financial transactions/positions across regulated markets.”

Blockchain utilization within Regtech is inevitable. But will the world’s financial regulators in developed nations be the first to embrace Regtech powered by blockchain? At a minimum, it appears the CFTC is willing to proceed.

CFTC Advocates Use of Blockchain for Swap Regulatory Reform

It’s about time.

The Commodity Futures Exchange Commission (CFTC) has published a white paper on Swaps Regulation Version 2.0. Entitled, An Assessment of the Current Implementation of Reform and Proposals for Next Steps, the unique aspect of this document is the fact that CFTC Chair J. Christopher Giancarlo is advocating on behalf of using distributed ledger technology (DLT) otherwise known as Blockchain.

“The future of regulatory reporting and record-keeping will likely look very different going forward.”

The paper addresses specifically a range of improvements to Swaps and to the current reform implementation that is pro-reform, aligned to Congressional intent while attempting to balance systemic risk mitigation. The CFTC notes that a healthy swaps market is supportive of broad-based economic growth.

Without making any judgement on the overall recommendations by the CFTC regarding Swaps, it is very interesting to note the CFTC is embracing blockchain technology:

“There is exciting potential on the horizon for continued technological advancement to improve swap data by making reporting systems more reliable, more automated and less expensive. The evolution of distributed ledger technology (DLT) could allow the CFTC and other regulators or entities to access swaps data automatically and seamlessly from reporting counterparties every time a swap is executed or updated on a particular blockchain, without human intervention or the use of other intermediaries. This functionality could increase the speed with which regulators could access data and increase the reliability of the data, while reducing the costs of making the data available to regulators. More specifically, CFTC access could, in the future, be incorporated from the outset into distributed ledgers of reporters. In this way, the Commission would be updated on new or amended swap transactions as they happen, allowing for near-real-time oversight of the swaps markets, including the Commission’s surveillance and risk monitoring responsibilities.”

The advent of DLT or blockchain may open a new era of both transparency and Regtech innovation. The CFTC may be the first financial regulator to public embrace this new type of technology.

The CFTC states that they

“… should collaborate with other authorities to cultivate the development of “regulator nodes” on distributed ledgers. The full potential of DLT in trade reporting is to transcend the fragmented regulatory structure by providing reference to a single, validated record of all financial transactions/positions across regulated markets.”

Blockchain is the future of regulatory reporting. Not just for Swaps but for all types of regulatory reporting and financial transactions. But it is also important to note that Giancarlo believes a push for a regulatory 2.0 will require Congressional action.

So will the legislative branch step in and create a 2020 act to streamline compliance, lower cost and move financial services regulation into the 21st century? Hard to tell.

Kudos to the CFTC.

You may download the CFTC document here.

[pdf-embedder url=”” title=”CFTC Swap regulation whitepaper April 2018″]

CFTC’s Fintech Innovation Initiative LabCFTC is Crowdsourcing Science Prize Competition Act

LabCFTC, the Commodity Futures Trading Commission’s (CFTC) Fintech initiative, is requesting public input to gather ideas and topics for innovation competitions to advance the agency’s Fintech goals.

“We launched the LabCFTC initiative to stimulate and promote market-enhancing Fintech solutions,” said CFTC Chairman J. Christopher Giancarlo. “By soliciting feedback from innovators on how the CFTC can best encourage innovation and leverage Fintech and Regtech solutions for the marketplace, we are not only fulfilling the mission of this initiative, we are moving the CFTC closer to my ultimate goal of making the agency a 21st Century regulator.”

LabCFTC Director Daniel Gorfine the competition may crowdsource Regtech topics to pursue;

“Our ultimate goal is to focus the energy of America’s innovators on ways to improve our agency and our markets so that we can keep pace with a rapidly digitizing world.”

The Request for Input (RFI), to be published in the Federal Register, is LabCFTC’s effort to gather feedback on how innovation competitions can stimulate innovation and make the CFTC more effective and efficient in satisfying its mission to foster open, transparent, competitive, and financially sound markets.

The CFTC is soliciting public feedback on:

  • focus areas for potential innovation competitions
  • how competitions could best be structured and administered to maximize their impact. While the RFI raises the possibility of competitions focused on data visualization tools, machine-readable regulatory rulebooks, and “smart” notice and comment systems, it seeks to crowdsource what may be the most promising topics directly from the innovator community.

More information on innovation competitions may be found at

CFTC Chair Giancarlo Comments on Crypto Fame, Importance of Principles Based Regulatory Approach for Digital Currencies

Speaking at Vanderbilt University Law School this past week, Commodities Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo made some interesting comments. Giancarlo, a Commodore Alum, spoke about the digitization of finance (Fintech) and the subject of virtual currencies. Giancarlo reflected on time spent with younger relatives over the holiday season, explaining his evolving perspective on cryptocurrencies and his vision for regulation;

“… during our New Year’s ski vacation with my kids, nieces and nephews – all Millennials and GenZers.  I spent time online reading blogs and watching videos about virtual currencies.  The more I watched, the more I saw that the energy and momentum behind virtual currencies was not just driven by technological innovation.  There was something else going on – something cultural … The new generation of Millennials and GenZ sees generational change driven by technological disintermediation of distrusted institutions. They see virtual currency – along with social media – as a means to bypass control by a failed generation of leadership.”

Giancarlo’s engagement with the generation that has embraced Bitcoin and other digital currencies helped to craft his opening remarks at the widely watched Senate hearing on cryptocurrencies and initial coin offerings (ICOs) where Giancarlo presented alongside his peer SEC Chair Jay Clayton. His appearance and comments helped to launch Giancarlo as a popular policy leader in the cryptocurrency world.


Following the Senate Committee hearing, securities Attorney Jesse Overall, a Contributor to CI, wrote about the differences between the SEC and the CFTC. Calling it a “tale of two cities,” Overall said Giancarlo’s approach was both philosophically and practically very different from that taken by Clayton – in significant ways. This policy disparity was highlighted once again at the Vanderbilt speech as Giancarlo tackled about the incumbent regulatory challenges.

CI touched base with Overall for his perspective on the presentation in Nashville. Overall said;

“Chairman Giancarlo’s speech on cryptocurrency at Vanderbilt University last week contained some interesting observations. He commented on his “new found fame” following his testimony at the Senate hearing on cryptocurrency and ICO regulation earlier this year and clarified that he is not a crypto evangelist. Most importantly, Chairman Giancarlo reaffirmed his view that, in response to profound technology-driven changes in the markets it regulates, such as the advent of virtual currency, the CFTC should generally follow a flexible, principles-based regulatory approach focused on specifying desired outcomes while leaving the choice of means and a greater degree of initiative to registrants and market participants, in keeping with the CFTC’s historical character as a regulatory agency.”

Giancarlo’s fame has been symbolized by the fact that following the Senate hearing his Twitter followers ballooned by tens of thousands of crypto enthusiasts who dubbed him #CryptoDad and #FUDBuster. (His Twitter followers now stand at around 50,000)

But as Overall states, Giancarlo is not blindly following the crypto-rave party. He is very aware of the fraudsters, scams, and criminals, that have populated the initial coin offering (ICO) market – even while legitimate purposes emerge for digital assets. Giancarlo stated;

“The cryptocurrency universe sadly contains a large share of get rich quick schemers, shady entrepreneurs and transactions in illegal goods.  It also appears to have a growing contingent of professional, institutional users.  Yet, it is also favored by advocates for the poor and unbanked, libertarians, pacifists, Occupy Wall Streeters, earnest tech geeks, economics buffs, long-term investors and many, perhaps naïve, but well-meaning young people.”

So how can the CFTC foster an ecosystem of innovation in a world where securities are guided by rules created before computers existed (or the iPhone for that matter)? For Giancarlo, and the CFTC in general, it is vital to be a principles based regulator – in contrast to the current SEC approach that has chosen to channel digital assets into established securities exemptions and rules.

“The relentless advance of technology and evolution of market structure requires a flexible, principles-based approach to oversight of some of the world’s most dynamic commodity and financial derivatives markets,” said Giancarlo. “When it comes to the challenge of crypto, it is clear that our governing statutes were not designed for this technology.  The CFTC’s governing law, the Commodity Exchange Act (CEA), was first passed in 1936 and has been amended several times since then.  Unsurprisingly, it contains no reference to virtual currencies.  It is like an old computer operating system that struggles to support this new and complex application.  In the absence of a legislative update, existing law and regulation must be interpreted on the basis of core principles to keep pace with technological change.” [emphasis added]

[clickToTweet tweet=”‘When it comes to the challenge of crypto, it is clear that our governing statutes were not designed for this technology,’ CFTC Chair J. Christopher Giancarlo #Cryptocurrency” quote=”‘When it comes to the challenge of crypto, it is clear that our governing statutes were not designed for this technology,’ CFTC Chair J. Christopher Giancarlo #Cryptocurrency”]

Giancarlo believes in the transformative nature of technology and the need for rules to keep up with the times. “It is part of keeping faith with new generation of market participants,” Giancarlo stated. Flexibility is demanded – instead of a one size fits all rigid path. While some believe tokenized offerings are just more of the same, Giancarlo obviously is of the opinion that digital assets are more than a flash in the pan. Perhaps it is time for a 2020 Act to replace the securities laws from the last century?

“In the Chairman’s view, such an approach is more adaptive and forward-looking than a prescriptive regime that would mandate compliance with detailed rules, given that virtual currencies did not exist when such rules would have been written,” added Overall.

[clickToTweet tweet=”Perhaps it is time for a 2020 Act to replace the securities laws from the last century? #Cryptocurrency #Fintech” quote=”Perhaps it is time for a 2020 Act to replace the securities laws from the last century? #Cryptocurrency #Fintech”]


December Minutes of Financial Stability Oversight Council Includes Discussion on Bitcoin by CFTC Chair J. Christopher Giancarlo

The Financial Stability Oversight Council (FSOC) includes every top financial regulator in the US government representing various agencies and a handful of state regulators. Chaired by the Secretary of the Treasury, Steve Mnuchin, FSOC has statutory mandate that creates for identifying risks and responding to emerging threats to financial stability.The goal is to bring together the collective expertise of the federal financial regulators, an independent insurance expert appointed by the President, and state regulators.

In December, it was reported that a working group had been formed to review cryptocurrencies, along with the potential for bad people to use them in nefarious ways. Recently, the minutes of the meeting in December were published sharing some insight into the discussion – specifically regarding Bitcoin.  The Chairperson, Secretary Mnuchin, noted that Treasury has been monitoring the use of Bitcoin, including its potential use for investor speculation or illicit activities.

In a presentation by CFTC Chair J. Christopher Giancarlo, described the CFTC’s oversight of Bitcoin futures markets. While little new information is included in the minutes it does show the high degree of interest, and concern, regarding the Federal governments oversight of Bitcoin and cryptocurrency in general.

It will be interesting to see if anything comes from the working group of regulators regarding Bitcoin / digital currency transactions.

The Minutes are embedded below.

[pdf-embedder url=””]


US CFTC Furthers its Innovation Credibility by Signing Agreement with UK FCA to Boost Fintech Development

The UK Financial Conduct Authority (FCA) and the US Commodity Futures Trading Commission (CFTC) have signed a formal agreement that commits the two regulatory agencies to work together to support Fintech. This is the first such agreement for the CFTC and just one of many by the FCA that has established bilateral relationships around the world with financial regulators. This is also the first such agreement with a US financial regulator. The two sides indicated their innovation initiatives, LabCFTC and FCA Innovate would collaborate on supporting firms.

“International borders shouldn’t act as a barrier to innovation and competition in financial services and that is why agreements like the one we have signed today with the CFTC, a forward looking and proactive regulator, are so important,” stated Andrew Bailey, Chief Executive of the FCA. “As our first agreement of this kind with a US regulator, we look forward to working with LabCFTC in assisting firms, both here in the UK and in the US, who want to scale and expand internationally in our respective markets. As part of the Arrangement, the FCA and the CFTC will be hosting a joint event in London to demonstrate how firms can engage with both regulators.”

The FCA has been recognized globally as leading the world in encouraging both innovation and, crucially, competition. Regulators have studied the approach that has helped to create the most robust Fintech ecosystem anywhere.

CFTC Chairman J. Christopher Giancarlo said the FCA’s Project Innovate is the “gold standard” for thoughtful regulation and innovation;

“I am delighted to join Andrew Bailey in this arrangement to demonstrate our cross-Atlantic commitment to facilitating market-enhancing innovation and sharing best practices in FinTech engagement,” Giancarlo said. “This is the first Fintech innovation arrangement for the CFTC with a non-US counterpart.  We believe that by collaborating with the best-in-class FCA Fintech team, the CFTC can contribute to the growing awareness of the critical role of regulators in 21st century digital markets. Our LabCFTC FinTech effort grew out of a bipartisan commitment to innovation, and I thank my fellow CFTC Commissioners Brian Quintenz and Russ Behnam for their continued leadership on these issues.”

Giancarlo recently testified before a Senate Banking Committee hearing on virtual currencies. His testimony was widely lauded by industry advocates for his approach towards the growing cryptocurrency market.

The agreement between the two agencies also highlighted the fact that another US regulator has been slow to engage in Fintech collaboration internationally. The Securities and Exchange Commission has yet to establish a public facing Fintech group nor create a regulatory Sandbox similar to what the UK trail-blazed.

The Cooperation Arrangement on Financial Technology Innovation is said to focus on information-sharing regarding Fintech market trends and developments. The agreement will also facilitate referrals of Fintech companies interested in entering the others’ market, and sharing information and insight derived from each authority’s relevant sandbox, proof of concept, or innovation competitions.

The FCA Innovate was launched in October 2014.  The CFTC created the LabCFTC in May 2017 and hired well known Fintech advocate Daniel Gorfine to help craft its mission. These initiatives were set up to help businesses with innovative ideas navigate the regulatory landscape and engage with the regulator.

To date, the FCA’s Innovation Hub has supported over 500 businesses and the authorization of 43 businesses. LabCFTC reports it has engaged with over 150 entities since its launch last year, published its first primer on the topic of virtual currencies, and soon will seek public feedback on a planned 2018 innovation competition.


The Cooperation Arrangement on Financial Technology Innovation

[pdf-embedder url=”” title=”fca-cftc-co-operation-agreement 2018″]


CFTC Technology Advisory Committee Meets Today, Topics Include Cryptocurrency, Blockchain & More

The Commodity Futures Trading Commission (CFTC) will hold a meeting of the Technology Advisory Committee (TAC) today at the CFTC’s headquarters in Washington, DC. The meeting is open to the public but you have the option to dial in or live-stream the meeting on the CFTC web site. The meeting was previously scheduled for earlier this month but was moved to take place on Valentines Day. The proceedings kick off at 10AM.

Beyond discussing the TAC’s scope and portfolio of issues, the Committee will discuss issues involving Fintech in CFTC regulated markets, including Blockchain, virtual currencies (Cryptocurrencies) and related futures products, machine learning and artificial intelligence, automated trading, and cybersecurity.

The agenda, embedded below, includes a panel on entitledBlockchain and the Potential Application of Distributed Ledger Technology to the Derivatives Markets,” and a second presentation “Market and Regulatory Developments with Virtual Currencies and Related Futures Products.”

Regulatory discussions will be front and center with both of these panels.

Later in the day, discussions on AI, cybersecurity and automated trading will take place as well.

CFTC Chair J. Christopher Giancarlo has become a bit of a Bitcoin darling as he has been perceived as very supportive of the emerging world of digital currencies. This will definitely be a good hearing to view.

Conference call information:

Domestic Toll Free: 1-866-844-9416
International Toll Numbers: International Numbers
Conference Passcode: 3599656

[pdf-embedder url=”” title=”CFTC TAC agenda 2.14.18″]

US Commodity Futures Trading Commission Launches Major Fintech Initiative: LabCFTC

The US Commodity Futures Trading Commission (CFTC) will embark on a “major Fintech initiative” with the creation of LabCFTC. The venture was launched to promote responsible Fintech innovation and to encourage competition in the markets the CFTC oversees.

“Simply put, LabCFTC is intended to help us bridge the gap from where we are today to where we need to be: 21st century regulation for today’s digital markets,” said CFTC Acting Chairman J. Christopher Giancarlo. “The purpose of LabCFTC is twofold: The first is to provide greater regulatory certainly that encourages market-enhancing FinTech innovation to improve the quality, resiliency, and competitiveness of our markets. The second is to identify and utilize emerging technologies that can enable the CFTC to carry out its mission more effectively and efficiently in the new digital world.”

Located in New York City, LabCFTC will accelerate CFTC engagement with Fintech and related Regtech. The initiative was approved by a unanimous vote of the Commission. The creation of “Sandbox” type environments, where early stage Fintech firms may experiment in live environments under the eye of regulators was popularized the UK Financial Conduct Authority (FCA). Since the FCA announced their Sandbox concept it has been replicated around the world. The US government has been slow to embrace financial innovation. The CFTC Fintech sandbox is the first governmental agency to act upon the realities of a quickly changing financial ecosystem by creating an in-house lab.

LabCFTC will be the agency’s focal point to promote Fintech innovation and fair competition by making the CFTC more accessible to Fintech innovators and serving as a platform to inform the CFTC’s understanding of new technologies.

LabCFTC will also be an information source for the Commissioners and the CFTC staff on responsible innovation that may influence policy development.

The CFTC said the pace of change has accelerated in recent years. Today, Fintech is driving innovation in financial markets across the globe. These technologies have the potential for significant or even transformational impact on CFTC regulated markets and the agency itself.

The Core LabCFTC Components will be:

  • GuidePoint: Available today, GuidePoint is a dedicated point of contact for FinTech innovators to engage with the CFTC, learn about the CFTC’s regulatory framework, and obtain feedback and information on the implementation of innovative technology ideas for the market. Such feedback may include information that, particularly at an early stage, could help innovators/entities save time and money by helping them understand relevant regulations and the CFTC’s oversight approach.
  • CFTC 2.0: An initiative to foster and help initiate the adoption of new technology within the CFTC’s own mission activities through collaboration with FinTech industry and CFTC market participants.

To accomplish the agency’s goals, LabCFTC will facilitate:

  • Through proactive engagement with the innovator community, a better understanding in the CFTC of how new innovations interact with the regulatory and supervisory framework, and identification of areas where the framework could better support responsible innovation.
  • Collaboration among the FinTech industry and CFTC market participants that facilitate responsible innovation in our markets and promote the use of technology within our agency. This collaboration will benefit many businesses and members of the public that rely on the derivatives markets the CFTC oversees.
  • CFTC participation in studies and research that facilitate responsible innovation in the markets and promote the use of technology within the agency.
  • Cooperation with financial regulators at home and overseas.
  • Monitoring of trends and developments to ensure that CFTC’s regulatory framework supports – and does not unduly impede – responsible technological innovation.
  • Information sharing about applications of FinTech, including potential use cases, benefits, risks, and solutions.
  • Engagement with academia, students and professionals on applications of FinTech relevant in the CFTC space.