Blockchain tech would have been the key to faster regulatory response in 2008 global financial crisis: CFTC official

The chairman of the United States Commodity Futures Trading Commission (CFTC) J. Christopher Giancarlo believes blockchain technology would have made a difference to the regulators during the financial crash in 2008.

In his speech, entitled “The New Futurism: 21st Century Financial Markets, Technology and Regulation,” Giancarlo said that if regulators had blockchain technology at the time, they would have easily accessed the real-time ledgers of large Wall Street banks and all regulated trading participants instead of attempting to “assemble piecemeal data to recreate complex, individual trading portfolios.”

“In short, what a difference it would have made a decade ago if blockchain technology on a private distributed ledger accessible to regulators had been the informational foundation of Wall Street’s derivatives exposures,” he said, adding that the technology would have allowed a “far faster, better-informed, and more calibrated regulatory intervention.”

The chairman also pointed out that having access to real-time distributed ledgers (DLT) could have been beneficial for regulators. DLT could be yet further enhanced by executing modern cognitive computing capabilities to detect anomalies in “market-wide trade activity and diverging counterparty exposures” that signify an increased risk of bank failure.

In addition, Giancarlo also shared two studies that found that blockchain technology can contribute considerable savings. The first study estimated that DLT could lead to financial institutions saving as much as $20 billion by 2022 in infrastructures and yearly operational costs. Another study found blockchain can cut trading settlement costs and capital requirements by $16 billion (annually) and $120 billion, respectively.

Before concluding his speech, Giancarlo forecasted that DLT would have a “broad and lasting impact” on different financial applications including “payments, banking, securities settlement, title recording, cyber security and trade reporting and analysis.”

The outgoing CFTC chairman delivered his message at Commissione Nazionale per le Societa e la Borsa (CONSOB) in Rome, Italy, on June 3, 2019.

Vitas Vasiliauskas, the chairman of the Board of Bank of Lithuania and an official of the European Central Bank, also emphasized the benefits of central bank digital currencies while warning to take caution during his talk at the Reinventing Bretton Woods Committee conference in Washington, DC, last April 12.