US CFTC Technology Advisory Committee discusses cryptocurrencies and DLT adoption

Photo: Diego M. Radzinschi/NLJ

The Technology Advisory Committee (TAC) of the U.S. Commodity Futures Trading Commission (CFTC) discussed cryptocurrency regulation and the adoption of distributed ledger technology (DLT), among other things, on Wednesday, March 27, Cointelegraph reported.

During the meeting, the TAC subcommittees highlighted relevant issues in their presentations for the TAC’s consideration.

The Virtual Currency Subcommittee first heard a presentation from Peter Van Valkenburgh, Director of Research at Coin Center, on various consensus mechanisms used for cryptocurrencies.

CFTC Commissioner Brian Quintenz said that the Ethereum Foundation’s plan to shift to a proof of stake consensus mechanism “raises important questions for both market participants and regulators, including how the use of either mechanism affects the likelihood that a bad actor could manipulate or falsify the ledger.”

Valkenburgh’s presentation was followed by a presentation from Kathryn Trkla and Charley Mills from the American Bar Association (ABA), which recently published a white paper, titled “Digital and Digitized Assets: Federal and State Jurisdictional Issues.”

Furthermore, the Distributed Ledger Technology and Market Infrastructure Subcommittee discussed the current state of DLT, including challenges toward more widespread adoption and potential use cases. The panel also looked into the areas where CFTC’s guidance could support further development.

In addition, representatives from the International Swaps and Derivatives Association (ISDA) discussed the recent release of the Common Domain Model (CDM) 2.0 for interest rate and credit derivatives. They also touched upon the topic of DLT adoption in the derivatives space.

“Once the terms of a swap can be reduced to a completely digital, industry-accepted standard, then automatic trade reporting, centralized recordkeeping, and, ultimately, smart contracts become possible,” Quintenz said.

The CFTC has included cryptocurrency surveillance practices and real-time market monitoring practices in Examination Priorities for its divisions for 2019.

Last year, the agency sought feedback to better understand the technology, mechanics, and markets for cryptocurrencies, with a particular focus on ether and its use on the Ethereum Network. It received more than 30 public comments, including some from R3, Coinbase, ErisX, ConsenSys, and others.