CFTC Commissioner Urges Regulators to Approach Fintech With an 'Open Mind'

CFTC Commissioner Rostin Behnam

A commissioner of the Commodity Futures Trading Commission (CFTC) said regulators should keep an "open mind" when dealing with rapidly changing fintech companies.

Rostin Behnam, who was appointed to one of five CFTC commissioner roles in 2017, spoke to attendees at the 2018 ISDA Annual Japan Conference in Tokyo about the challenges he's seen regulating crypto assets, bitcoin and other technologies during his first year in office.

His Oct. 25 remarks come at a time of increasing CFTC enforcement activity, overall, and as the Securities and Exchange Commission, which views cryptocurrencies as securities, has ramped up scrutiny of fintech ventures. The SEC launched a fintech division last week to help increase focus on the industry.

"I believe that we as regulators must approach fintech with an open mind and a healthy respect for our role in the markets. There is great regulatory uncertainty regarding how fintech fits into our existing rules and regulations," Behnam said. "Every innovator at the edges of what is permitted is hoping that his or her product will prove to be what is desired by the market and deemed compliant by the regulator."

He said that, for many in the fintech business, technology is outpacing regulations, leaving companies and inventors unsure of how to comply with laws that don't fit the industry. Many innovators want support from the commission, he said, but that can't be given without a consideration of the potential consequences.

Part of the lag in fintech regulations comes from regulators' lack of understanding around the new technology, Behnam said.

"If innovators want access to financial networks, we regulators, whose job it is to ensure fair, safe, and transparent markets, need to understand how their technologies work and the risks that they bring into the world’s markets," he said.

Behnam encouraged regulators in the G-20, including Japan, to better understand the technology and clear up regulatory uncertainty in a way that mitigates risks and protects consumers.

Currently, he said, many regulators are still looking at new technology "in awe" without raising serious questions and moving toward sound policies. But those regulators have been given the "essential role" of helping entrepreneurs in the fintech space grow "into a culture of regulation and compliance."

"Though we regulators must balance the urgency to create new laws and regulation with our current lack of a full understanding of the promise and perils of fintech, we are nevertheless accountable to all those whom the markets affect, and we must ensure that the legal issues and risks presented by all technologies are identifiable and solvable before they cross the horizon," he said.