Smart contract coders warned by CFTC regulator
Blockchain smart contract coders could be held accountable if their codes could be used in a manner that violates Commodity Futures Trading Commission (CFTC) regulations, warns CFTC Commissioner Brian Quintenz.
Old laws can be applied to new technologies such as smart contractsSpeaking at the 38th Annual GITEX Technology Week Conference in Dubai he asked who would be responsible for ensuring that activity on the blockchain complied with the law when multiple applications can run autonomously on decentralized platforms via smart contracts.
He said: “The appropriate question is whether these code developers could reasonably foresee, at the time they created the code, that it would likely be used by US persons in a manner violative of CFTC regulations.”
Quintenz was discussing how old laws can be applied to new technologies such as smart contracts that can be “easily customized and are almost limitless in their applicability” to the extent they can even be used to replicate traditional financial instruments.
He added that although these contracts are “self-enforcing,” and “operate without further intervention” they nonetheless fall subject to regulations and particular legal precedents. He used the example of predictive data about future financial events, like a stock’s performance.
“In the past, the CFTC has generally prohibited prediction markets as contrary to the public interest,” he said. “Only permitting them in limited circumstances when it has found that they operate on a small-scale, non-profit basis, and serve academic purposes.”
As a result, he encouraged smart contract coders to engage with CFTC staff to see if they can offer such products while staying complaint with CFTC regulations.
He concluded: “Smart contract applications on blockchain networks hold great promise. They have the potential to open up new markets and create efficiencies in existing ones. At the same time, they also raise novel issues of accountability that users and policy makers alike must consider.
“I would much rather pursue engagement than enforcement – but in the absence of engagement, enforcement is our only option.”