The US treasury department has released a report calling for a less prohibitive regulatory approach when handling innovations and various developments in the financial technology sector.
The report was released on the 31st of July and features 222 pages focusing on ‘Nonbank Financials, Fintech, and Innovation.’ The report briefly discussed cryptocurrencies and block chain based technologies, confirming that they are being explored through “an interagency effort led by a working group of the Financial Stability Oversight Council.”
Generally, the report demonstrates a step forward by the US government to support new financial technologies and to upgrade current regulatory methods in order to get rid of the unnecessary inhibitory influence on highly potent financial technology innovations.
The report supports a “more streamlined and tailored oversight,” and comes up with a number of recommendations that show a solid inclination towards simplifying complicated regulatory measures that inhibit growth.
The recommendations included making some changes to the legislation that governs state-by-state transmission of money, which also applies to crypto exchanges based in the US.
The report acknowledged the unprecedented interest in cryptocurrency and blockchain technologies from an ever growing list of financial authorities, and proceeded to recommend for special efforts by the G20 to establish the metrics needed to monitor the financial sector. In support of this, it cites G20’s affirmative statement earlier in March which said,
“That technological innovation, including that underlying crypto-assets, has the potential to improve the efficiency and inclusiveness of the financial system.”
Though the report advocates for a more conducive environment for crypto innovations, it acknowledges the associated risks that the crypto world “pose for investors’ protection and anti-money laundering and illicit finance regimes,”
The report goes on to explore the numerous possibilities associated with distributed Ledger Technologies by looking at some of the promising applications which are still under development.
“Commodities trading and securities settlement […] trusted identity products and services […] [and] the potential for central bank-backed digital currencies, or a tokenized form of a fiat currency that utilizes DLT, [which some assert] could potentially help reduce fees, processing times, and operational risk for market participants.”
The report went on to advocate for efforts “to create labs, working groups, innovation offices, and other channels for industry participants to engage directly with regulators.” This is expected to create a highly beneficial interdependence relationship for the economy at large and overall competitiveness on a global scale.
With this development, the US treasury seems to share an inclination towards creating a conducive environment for cryptocurrency and blockchain technology. Recently, we saw the CFTC’s president, Christopher Giancarlo, declaring that the US should be “four years behind” other countries due to the absence of processes that would allow the commission’s direct participation in blockchain based proof of concepts.
Beyond Giancarlo’s eye opening discourse, we also witnessed a joint hearing between SEC and CFTC earlier this year in February where Giancarlo outlined a number of potential benefits of the blockchain technology to the financial sector.