A committee within the U.S. Commodity Futures Trading Commission (CFTC) is actively hoping to bring about regulatory change regarding cryptocurrencies and distributed ledger technology (DLT). The Technology Advisory Committee (TAC) held a meeting on Wednesday where its members discussed regulations for both sectors. In attendance were representatives from the crypto industry, including the director of research for the Coin Center, Peter Van Valkenburgh.
In his opening remarks, CFTC Commissioner Brian Quintenz stated, “[Our] Distributed Ledger Technology and Market Infrastructure Subcommittee will present on the current state of DLT, including challenges toward more widespread adoption and potential use cases. The panel will also explore if there are specific areas where CFTC regulation may be inhibiting the adoption of DLT or additional areas where further guidance from the agency could support further development.”
Valkenburgh dove into consensus mechanisms for crypto, including proof-of-work (PoW) and proof-of-stake (PoS). Quintenz pointed out that the plan of Ethereum to switch from PoW to PoS is causing red flags and regulatory questions, including whether or not the blockchain’s ledger could be faked or manipulated.
PoW has already been shown to be a stronger option, as it deters attacks on the blockchain. It is a failed solution and, as crypto developer Gregory Maxwell once said, “PoS just doesn’t work… It expects you to use the content of the blockchain to decide the content on the blockchain.” Despite overwhelming evidence that PoW is the only viable solution, Ethereum has been talking about moving from PoW to PoS for more than a year.
Two members of the American Bar Association’s (ABA) Jurisdiction Working Group—Kathryn Trkla and Charley Mills—were also on hand, providing background and details on a report by the ABA, “Digital and Digitized Assets: Federal and State Jurisdictional Issues.” That report discussed at great lengths the state of blockchain and crypto regulations in countries such as the U.S., Switzerland and Malta.
There was also discussion led by the International Swaps and Derivatives Association (ISDA) on the release of the Common Domain Model 2.0 that has been designed for interest rate and credit derivatives. As it relates to crypto, the ISDA focused its talk on the ability to digitize transactions and automate trading, given the advances seen by DLT in the derivatives space.
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