A commissioner of the Commodity Futures Trading Commission (CFTC) has spoken about the inadequacies and inefficiency of the current “closed ledger” banking system. He adds that distributed open ledgers could revolutionize financial ecosystems while noting certain “disruptive” implications for the current financial industry and those who are a part of it.
Commissioner J Christopher Giancarlo spoke about bitcoin and the blockchain in a wide-ranging lecture on Fintech and international finance at the Harvard School of Law on December 1st. In a guest lecture that began with a disclaimer that his views did not constitute those of the CFTC, a CFTC commissioner the potential of Bitcoin’s underlying technology – the block chain.
In early 2014, it was revealed that the CFTC was considering bitcoin regulation to increase oversight into the cryptocurrency and other virtual or digital currencies. Come September 2015, Bitcoin was officially deemed a commodity by the CFTC.
In a press release at the time, the CFTC said:
…the CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities.
Also read: Bitcoin Price Regulation and the CFTC
In his lecture, Giancarlo spoke about the current “closed ledger” financial system being inefficient and unstable, while citing the three-day settlement timeframe and the risks and costs involved with the current banking system. He also made light of the multi-trillion dollar swaps market to still use handwritten tickets that were faxed to counterparties’ offices every day.
In no uncertain terms, Giancarlo stated:
Distributed open ledgers have the potential to revolutionize modern financial ecosystems.
Distributed ledgers will have enormous implications for financial markets in payments, banking, securities settlement, title recording, cyber security and the process of collateral management that is made infinitely more complex by new regulations.
He touched upon major investment and initiatives being undertaken by banks and financial institutions to study and find applications for blockchain. He cites the example of a recent working group set up by the London Stock Exchange along with other banks and trading firms.
Drawing a parallel between the blockchain and the internet, Giancarlo notes blockchain to have “the potential to de-centralize legal recordkeeping the same way the internet de-centralized data and information.” This, however, will have an adverse effect on the current banking and financial industry as well as those employed by it, according to the Commissioner.
The transformation will not come without consequences, however, including a greatly distruptive impact on the human capital that supports the recordkeeping of contemporary financial markets.
The lecture comes soon after former Barclays’ chief Antony Jenkins made similar comments about the disruptive force that blockchain can be, even when the technology renders certain jobs obsolete. Jenkins said:
I predict that the number of branches and people employed in the financial services sector may decline by as much as 50% in the next ten years. Even in a less harsh scenario, I expect a decline of at least 20%.
The complete account of Giancarlo’s lecture can be read here.
Featured image from Shutterstock.
Last modified: June 13, 2020 9:34 PM UTC