The U.S. Commodity Futures Trading Commission (CFTC) commissioner, who authored the "Ten Fundamentals for Responsible Digital Asset Markets", is currently developing best practices and industry standards.
“That's going to include looking at digital asset taxonomy, pre-trade execution, post-trade requirements and, importantly, it will include looking at governance risk and control frameworks,” said CFTC Commissioner Caroline Pham.
While the "Ten Fundamentals for Responsible Digital Asset Markets" prioritized the protection of customers and the retail public, Pham discussed innovation and national security at the 2023 D.C. Digital Blockchain Summit on March 21.
“Having a strong rule of law, having legal certainty, having political stability, and having that regulatory clarity are the three pieces that create the ideal circumstances or conditions for innovation to thrive,” she said.
The 10 fundamentals include promoting free markets, addressing conflicts of interest, ensuring market transparency, enforcing market conduct rules and mitigating systemic risk.
Pham was a lecturer on the panel "Forward Thinking: Policies Shaping the Digital Asset Markets," moderated by Perianne Boring, the founder and CEO of the Chamber of Digital Commerce.
The Chamber of Digital Commerce organized the annual summit.
“Let's be honest,” Pham told the Summit audience. “Regardless of the underlying asset class, most of what you need for responsible safe markets is well known whether it's equities, FX, or credit rates. It's pretty much the same across the board.”
The best practices and industry standards will be developed under the digital asset markets subcommittee, which is charged by the CFTC’s Global Markets Advisory Committee (GMAC) to identify and assess key issues and policy proposals pertaining to digital finance, tokenization of assets, non-financial activities and Web3, as well as blockchain technology.
“The reason I'm excited about this and why I think it's interesting is because there's been a lack of guidance issued by the agencies,” Boring said. “This is another type of tool that the commissions have at their disposal.”
Protecting integrity, while not stifling innovation, has been a challenge due to the diversity of digital assets, according to Pham.
“There isn't a one-size-fits-all solution because not all digital assets are the same,” she said. “In every industry there are going to be the good and the bad. What we need to do is make sure that we have clear frameworks in place to separate the good from the bad to ensure that we're going after bad actors, but also that we are creating the opportunities for growth in compliant digital asset markets.”
When Boring expressed concern about other jurisdictions moving ahead with regulation, while the United States continues to wrangle with how to define cryptocurrencies, Pham said the CFTC has some regulatory oversight until they are defined as securities.
“Who can define what is a security? Congress, the SEC or the courts, and out of those three tracks, I think you see the courts moving the fastest,” Pham added. “Promoting American innovation and American leadership is not just a talking point. It's a real thing. We have our military power but we also have our economic power and we need to be really conscious and cognizant of anything that might undermine the U.S. dollar’s place in the world economy.”
