Treasury report calls for more ‘agile’ regulation of blockchain
An influential US Treasury Department report published on Tuesday called for a more modern approach to regulation in the financial services ecosystem to enable dynamic innovation of fintech projects such as blockchain development, cloud computing and artificial intelligence.
The report said the US had a “long and complex” history of state and federal regulation in financial services.
“The Treasury supports several specific regulatory approaches that would provide greater clarity and flexibility in the regulatory operating model for firms looking to provide financial services,” the report said.
Among the suggestions recommended in the report to the US President, the Treasury said existing regulations must be updated to enable innovations to keep pace with the rapid changes in how banks were partnering with and investing in fintech and technology firms.
While the report had scant specific mention of blockchain, its recommendations on various financial functions that have seen blockchain use growth were wide ranging.
On faster payments the report recommended that institutions should have the ability to access the most innovative technologies and that the Federal Reserve “move quickly to facilitate a faster retail payments system, such as through the development of a real-time settlement service, that would also allow for more efficient and ubiquitous access to innovative payment capabilities”.
The report recognised that current regulatory frameworks failed to provide appropriate regulatory clarity and assurances that removes barriers to innovation.
Here it was more specific about blockchain: “New technologies, like predictive data analytics, artificial intelligence, and blockchain or distributed ledger technology, are examples of promising innovations that could be used by financial services firms.
“They are also technologies for which regulatory treatment may be uncertain, if for no other reason than that innovative technology requires time to mature. From the perspective of regulators, these technologies may pose unknown benefits and risks.”
The report recommended that federal and state regulators establish a unified solution that “co-ordinates and expedites regulatory relief under applicable laws and regulations to permit meaningful experimentation for innovative products, services, and processes”.
Concluding that that the pace of technological development risked leaving regulators struggling to respond, the report concluded: ” It is critical that financial regulators stay abreast of developments and establish mechanisms for adopting appropriate regulation and guidance accordingly without stifling innovations.
“Regulators must be more agile than in the past in order to successfully uphold their missions without creating unnecessary barriers to innovation.
“This requires principles- and performance-based regulation that enables the private sector to adopt innovative, technology-based compliance solutions.”