CFTC Sets Up Lab to Connect with Fintech Firms

LabCFTC will help guide firms through CFTC rules and open the agency to updating its regulations to meet changing market conditions.

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The Commodity Futures Trading Commission (CFTC) is the latest regulator to reach out to financial technology companies with its announcement of a fintech lab aimed at promoting responsible innovation and helping firms navigate its policies.

The program is called LabCFTC and offers fintech firms a place to seek guidance on current CFTC regulations. The initiative has two core components: GuidePoint—to be located in downtown New York—which will be a direct point of contact to engage with the regulator; and CFTC 2.0, which will look at how the CFTC can use emerging technology to keep pace with the market.

CFTC acting chairman Christopher Giancarlo says the outreach is in recognition of the place fintech firms have in the market, and to encourage innovation.

“To be clear, we are not going to tell someone whether their business plan is a billion dollar idea, or even a good idea; others are far better positioned to do that. Nor will GuidePoint provide legal advice. That is not our job as regulators. We are not a substitute for good legal counsel,” Giancarlo says. “But what we hope to offer is timely, meaningful and useful feedback on the regulatory context of proposed fintech innovations.”

The CFTC follows the Office of the Comptroller of the Currency (OCC) in reaching out to fintech firms. The OCC is working on allowing firms to apply for special purpose national bank charters, which will enable them to operate as a bank. That plan has faced opposition from the Conference of State Bank Supervisors, which filed a lawsuit in April.

The other component of the initiative is an effort to use technology within the agency. Part of the plan is to establish an internal fintech innovation lab to identify useful applications and explore how emerging technologies like distributed ledger can enhance CFTC tasks.

Giancarlo says the CFTC is cognizant that its rules were mostly written for analog trading markets that have now been replaced by electronic trading, and need to be updated.

“By engaging with fintech firms, we will learn where the friction points are between innovation and our regulations. Through LabCFTC, we will be able to put our rules under the tension of innovation. This is not only good for markets, innovation, jobs and growth—it is good for us too,” he said. “As regulators, we know that our rules were mostly written for 20th century analog trading markets—the kind of markets in which Eddie Murphy famously bid up the price of orange juice future in the movie Trading Places.”

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