Excerpts from opening statement of CFTC Commissioner Rostin Behnam before the Market Risk Advisory Committee, January 31 2018
Ground-breaking new ideas have gone from theory to application in just the past few months. I am especially mindful and appreciative of the Commission’s ongoing efforts to affirmatively exercise its regulatory authority and expertise while remaining ever vigilant of the risks associated with the adoption of nascent technologies.
The launch of the bitcoin futures products is a testament to the forward thinking, innovative spirit of the derivatives markets. As the market and market participants continue to adopt technologies that make new products, new relationships, and new forms of conduct possible, I believe it is critical that the CFTC: (1) engage with industry in addressing risk; (2) provide legal and regulatory certainty to the market; (3) educate the general public; and (4) question and challenge the status quo, in the market and within the Commission.
The Commission’s recently announced approach and responsibilities with respect to virtual currencies—unquestionably new and novel assets—the overarching theme is largely one of process. We all should feel accountable for what we do, but also for what we do not do. And while we are now living in an age that is not big on process, but often prefers to emphasize “likes” and tweetable sound bites, process is important because it provides the bearings, the connections in the record—and in the story—of how we accomplish our duties.
The CFTC staff developed a standard of “Heightened Review”, “within the limits and parameters of the current self-certification process, for determining whether the Bitcoin futures products comply with the exchange’s obligations under the CEA core principles and CFTC regulations and related guidance.” However, the need for a new “Heightened Review” process demonstrates that the Commission must reconsider its historical regulatory approach to new products – in fact, the implementation of the “heightened review” process is a new regulatory approach in and of itself. Such changes require a more formal process, subject to Commission deliberation and public notice and comment. The Chairman has asked the CFTC’s General Counsel to propose for Commission consideration possible regulatory and/or statutory steps to better support the staff’s approach to virtual currency product review. I look forward to exploring our options, which I hope will include some parameters for determining when self-certification may not be appropriate, and for determining when such matters are appropriately brought before the Commission.