LabCFTC's Purpose: Get Out of shell and get innovative ideas in Fintech

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.


LabCFTC’s Purpose: Get Out of the Ivory Tower

December 17, 2018

Though the head of the Commodities Futures Trading Commission’s (CFTC) Fintech office is working with cutting-edge technologies, he said one reason for the creation of the office was to fix an age-old problem.

Daniel Gorfine is CFTC’s Chief Innovation Officer and he was the latest guest on Andrew Busch’s podcast “CFTC Talks”; Busch is CFTC’s Chief of Market Intelligence.

It is Gorfine’s job to know what things like Blockchain, distributed ledger technology, artificial intelligence, the internet of things, and virtual reality, and how those technologies affect derivative markets, which CFTC regulates.

Gorfine said one reason for the creation of LabCFTC, the CFTC’s fintech initiative was to get the CFTC out of its proverbial ivory tower- regulators and go out into the country to meet with innovators.

Regulators being out of touch is one common complaint not only in the financial field but in all fields.

“There was an idea that we needed to be getting out of Washington- going around the country and meeting with innovators around the country to hear their thoughts, questions, learn about what they’re working on.” Gorfine said.

One thing Gorfine said was that innovators wanted an audience with the regulators.

“I think the answer has been a resounding yes. We’ve had, I believe, over two hundred fifty meetings with innovators over the last year.

LabCFTC Director Daniel Gorfine CTFC

Gorfine on 2018

Busch asked Gorfine for three things he’s observed from meeting with these innovators in the 2018 CFTC Fintech Conference and other times.

The first related to the previous point he made, which was the importance of engagement.

Gorfine also warned that a risk is the broad lack of technological literacy, especially among those in power.

He asked rhetorically, “Do senior leaders, whether it’s in government, business, do senior leaders understand the core technologies that are powering and driving new business models?” Gorfine said, “I worry about tech failure causing a problem and us across the board, not having the right leadership of that technology to help mitigate that.”

On the flipside, Gorfine noted that all US financial regulators have developed an office or initiative “around technology and innovation”.

LabCFTC was one such initiative, but the Securities and Exchange Commission (SEC), in October 2018, also launched the Strategic Hub for Innovation and Financial Technology.

FINRA, the Financial Industry Regulatory Authority, launched the Innovative Outreach Initiative in Summer 2017.

Gorfine on Crypto

“This time last year, it was all Bitcoin all the time,” Bush said.

Bitcoin was valued at $17,900 on December 15, 2017, and was beginning its bubble run which has still not subsided, it’s currently valued at approximately $3,150.

“If we reflect back on what we have seen, we certainly went through a period at the end of last year and the beginning of this year that looked like a bit of a hype cycle.”

While he said there was real innovation “underpinning the development of crypto-assets,” but there will come a time, “When they really need to demonstrate actual utility…Whether the application is payments- can you really scale a payment-based solution as many people believed that crypto could do in the early days. Can you actually use it for certain utility purposes?”

Gorfine believed that the technology would make an impact beyond crypto-currencies, including into areas of trading.

Gorfine on 2019

Engagement will continue being an emphasis in 2019, Gorfine said.

Topics to look out for in 2019: stable-coins, anonymity coins, and machine learning.

LabCFTC will hope to create an innovation competition in 2019 to help stimulate activity in that area.

“More primers,” Gorfine said, “I think these primers are a great way to engage in an ongoing dialogue with these innovators and the broader market.” The last primer done by LabCFTC was on smart contracts.

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