Before I close, I want to take a minute to recognize an essential contribution to tonight’s launch. In January, I asked Jeff Bandman to advise me on FinTech matters and lead a review of FinTech innovation issues. The review was focused on three issues:
How can FinTech innovation help identify CFTC rules and regulations that need to be updated for relevance in 21st century digital markets?
How should the CFTC leverage FinTech innovation to make us a more effective regulator?
What is the right role of the CFTC in promoting US FinTech innovation in CFTC regulated markets?
That review is now complete and the result is LabCFTC.
I must acknowledge the extraordinary work of Jeff and his LabCFTC team,21 the previous FinTech staff working group22 and others to make today’s launch possible. I am grateful to Jeff, in particular, for his fine work as the architect of LabCFTC.
I also want to thank again Commissioner Sharon Bowen for her support for the LabCFTC initiative. It signals the continuing bipartisan spirit of progress at the CFTC.
In drawing to a close, the question of how U.S. market regulators handle the digitization of modern markets is critically important. It requires delicate balancing. To ensure vibrant, accessible and durable markets, regulators must cultivate and embrace new technologies without harming innovation. There certainly must be effective safeguards of market integrity and credibility with strong rule enforcement, but those safeguards should not bar promising innovation and continuous market development.
Good regulation should not inhibit technological innovation. Rather, innovation should foster better and smarter regulation. Regulators must engage in a constant and evolving dialogue with innovators precisely because we need to understand the impact they are having on the very marketplaces we are charged to supervise. We must partner with them, experiment with them, learn from them and innovate alongside them, if we are ever to keep pace with the digitization of modern markets and protect their 21st century participants.
Moreover, regulators have to do our part to unchain investors, innovators and job creators to spark America back to strong and sustainable growth and job participation. Healthy financial and risk transfer markets are essential to long-term economic growth.23 To enable broad-based prosperity, we must foster vibrant and competitive markets that support free enterprise, personal choice, voluntary exchange and legal protection of property. We must ensure that U.S. markets continue to play their essential role in marshaling resources and deploying them in productive ways: linking savers and investors, risk takers and risk transferors and shifting capital to those who can best utilize it and production risk to those who can best bear it. We must enable our rapidly evolving digital markets to be engines for economic freedom and opportunity24 – the ingredients that have always been, and always will be, essential for prosperity.
The world is changing. Our parents’ financial markets are gone. Tired, old command and control government solutions are bumping up against the new flexible, digital economy. Twenty-First Century markets require 21st century regulation.
It is time for government agencies like the CFTC to embrace innovation, repurpose obsolete rules and unchain U.S. trading markets. Federal regulators have a responsibility to ensure that today’s digital markets continue to serve our domestic end-users, whether Texas wheat farmers, North Dakota oilmen or Illinois manufacturers.
And beyond that, regulators must harness these new technologies in support of healthy U.S. capital and risk transfer markets. We must enhance our markets’ competitiveness in attracting the world’s capital. We must further enable investors, innovators and job creators to drive the U.S. economy back to strong growth and broad-based prosperity. We must ensure our markets remain the world’s deepest, most durable and most vibrant risk transfer markets in the algorithmic, digital world of the 21st century.
This is our challenge. It is in our vital national interest that we succeed. Thank you.