Good morning folks. The @CFTC Technology Advisory Committee sponsored by Commissioner @CFTCquintenz is meeting today, and I'm here in DC to cover for @coindesk. Regulars know the drill, thread starts here 👇
Here's today's agenda: cftc.gov/media/3491/tac…
Of note: panels on stablecoins, custody and multiparty computation, and self-regulatory organizations (worth noting that @CFTCquintenz has long been a proponent of SRO efforts)
Of note: panels on stablecoins, custody and multiparty computation, and self-regulatory organizations (worth noting that @CFTCquintenz has long been a proponent of SRO efforts)
(Giving this a hashtag -- #CFTCTAC)
Getting things rolling -- @CFTCquintenz notes that it's the 5th TAC meeting and will be covering a wide range of topics #CFTCTAC
Commissioner Quintenz is running through the different panels and panelists (see agenda) #CFTCTAC
The first panel's about audit trails. Natalie Tynan of @FIAconnect says concerns were previously raised with the CFTC; her group has since worked on refining their recommendations and are presenting those today #CFTCTAC
We're talking about audit trail requirements enforcement right now. I'm not live-tweeting this session as much at least in part because it's less immediately relevant to the stuff I usually cover and partly because I don't entirely understand what's being said
Tl;dr the panel's created a set of recommendations they believe will make audit trail requirements a bit more efficient for DCMs and related entities
We're on to stablecoins #CFTCTAC
Stablecoin panel: Steven Becker (@MakerDAO), Charles Cascarilla (@PaxosGlobal), Eddie Wen (@jpmorgan) and Tommaso Mancini-Griffoli (@IMFNews) #CFTCTAC
.@PaxosGlobal's Cascarilla is up first, runs down what Paxos has tokenized to date, including dollars #CFTCTAC
(Livestream: )
"I think the use cases around stablecoins are really around trading, settlement and payments, movements of money and that works for a number of different types of businesses," Cascarilla says #CFTCTAC @PaxosGlobal
Becker outlined decentralization and why it's important in his view, and has now moved on to explaining DeFi to the CFTC group -- saying it's a "decentralized protocol layer on top of ethereum" (though it's blockchain-agnostic) #CFTCTAC
Maker's protocols provide tools to the DeFi space, Becker says -- collateralization tool, credit generation and staking rewards #CFTCTAC
Becker is explaining how Dai works: "Let's pretend that you've got $15k of gold in your basement, you take that gold out and you go into your study where you just prepare yourself a very nice smart [contract?], you stick that $15k in ... and in turn generate $10k credit" #CFTCTAC
Dai isn't created from nothing, Becker says #CFTCTAC
"We have concluded largely the most viable applications of this technology [are?] ... within either our payment space or the settlement or transactions in the back of it," Wen says #CFTCTAC
JPMCoin's yet to receive full regulatory approval so it remains in a prototype stage, Wen says #CFTCTAC
JPMCoin can be very powerful but it's worth noting it doesn't use traditional payment rails, Wen says #CFTCTAC
It could be costly by not using traditional rails but ease of reconciliation and lower costs and reducing workload on operations staff could make it efficient for JPM, Wen says #CFTCTAC
Wen says it's important to have guidance and oversight of digital assets, including stablecoins: "We feel very strongly that regulation should be activity-based ... it should be regardless of the type of financial institution that's conducting those transactions" #CFTCTAC
Wen advocates for minimum standards -- viewing systemic risks ie cyber security, data privacy, resiliency -- establishing guidelines and guardrails for these make sense, he says #CFTCTAC
JPMorgan coin "is not an attempt to replace the global payment system," Wen says. "It is a mechanism designed to improve it." #CFTCTAC
JPMCoin could reduce operational pain points and provide greater traceability, Wen says #CFTCTAC
Tommaso Mancini-Griffoli is speaking now but his presentation is the same one he gave during the CFTC's Fintech Forward conference last October I'm pretty sure -- I covered that in the thread linked, will add anything new
.@ErisX_Digital CEO Tom Chippas is asking if the accounts @PaxosGlobal holds its reserves in generate interest, and do token holders receive those. Cascarilla says it's complicated but tl;dr not really #CFTCTAC
Commissioner @CFTCberkovitz asks why @jpmorgan needs a stablecoin to facilitate the customer transactions. Wen says there's a cost (ie it takes longer) without the new rails to conduct these transactions #CFTCTAC
Had a long discussion around technical controls and we're now moving onto a presentation about the ISDA common domain model standard. I am going to look this up but do not expect to be live-tweeting it all
Okay so apparently this is about potentially delivering market standards as code to kind of streamline that process? But sounds like it could even include smart contracts #CFTCTAC
Thread/commentary on Becker's presentation here:
Lunch break; panels resume at 13:30 ET
Next panel: Custody and insurance, and how multiparty computation might help, ft. James Knox of Aon and Itay Malinger of Curv. Knox is opening with a list of exchanges which have been hacked and some of the ICOs involved in fraud #CFTCTAC
"When Mt Gox happened several years ago ... [it had] a chilling effect on the insurance companies. Thy started to back away when they saw what happened, some serious money involved in [those] losses," Knox says #CFTCTAC
(As @pete_rizzo_, @twobitidiot and @joonian have been discussing, Mt Gox happened six years one day ago. Long before I got into the space but clearly some lasting impacts) #CFTCTAC
"An uncertain regulatory environment" is having an impact on the insurance space, Knox said. He said in his view a lot of insurance companies are sitting on the sidelines right now because of regulatory issues they're concerned about, as well as the newness of the space #CFTCTAC
There's a tradeoff between security and liquidity and solutions right now are difficult to get insurance for, Malinger says #CFTCTAC
Malinger is basically walking the group through multiparty computation and how it works. CoinDesk's @mikejcasey wrote an explainer on it last June, if you're not familiar: coindesk.com/multiparty-com… #CFTCTAC
First q for Malinger is "why is multiparty computation preferable?"
Malinger notes that MPC lets you change the 'secrets', which is better from a security perspective (no unchanging private keys to steal); same underlying infrastructure as existing networks #CFTCTAC
Malinger notes that MPC lets you change the 'secrets', which is better from a security perspective (no unchanging private keys to steal); same underlying infrastructure as existing networks #CFTCTAC
We're taking a 5 minute break before the next presentation
(yes took 15 minutes to write something sorry)
.@BandmanJeff detailed Global Digital Finance, an industry body hoping to promote some best practices in the space; it has about 85 global members and a custody code of conduct that's now going to public consultation, he says #CFTCTAC
"So how do the GDF codes relate to law and regulation? I think in one sense they fill gaps ... there are many evolving areas. They also try to be a single set of global rules that others can live on," @BandmanJeff says #CFTCTAC
The GDF has a self-attestation registration, @BandmanJeff says, likening it to a CFTC self-certification process. "I think over time there's interest in moving to a kind of external certification or audit process." #CFTCTAC
Hussain's likening the VCA's efforts to the Japanese Virtual Currency Exchange Association, a Japanese SRO overseeing the space, notes that @bitFlyer is a founding member of the JVCEA and @bitFlyerUSA is a founding member of the VCA) #CFTCTAC
Japanese SROs are slightly different from US SROs as I understand it, with the key differences being in legal oversight authority. Don't quote me on this though, it's been a while since I've looked at this #CFTCTAC
Brad Vopni, of the Association for Digital Asset Markets (ADAM), notes that marketplaces in the crypto space can operate as the exchange clearinghouse, the custodian, the broker "and sometimes even the dealer." #CFTCTAC
Vopni says ADAM was founded to find a balance between space right now and space in the future #CFTCTAC
.@ErisX_Digital's Chippas asks if crypto is "really that different," noting that under US laws a lot of tokens are securities or fall under commodities law. @BandmanJeff says crypto's this tiny market that is unique in some properties (paraphrasing here) #CFTCTAC
Chippas said he heard anecdotally the eBay is a massive, unregulated, digital gold retail market, and that there may be existing analogues to crypto that can be looked to when looking at this regulatory structure #CFTCTAC
.@CFTCberkovitz asks about what potential enforcement authority an SRO might have, noting some crypto exchanges might choose not to be a part of the SRO and be subject to those penalties #CFTCTAC
We're wrapping up. Last item on the agenda is a vote:
Here's the language of the resultion
The motion carries unanimously, or at least there were no 'nays' and no abstentions
.@CFTCquintenz thanks the committee members and panelists in closing; @CFTCbehnam says the meeting raises some questions (in a good way); @CFTCberkovitz highlights some of the presentations and we're done, thanks for following along today folks #CFTCTAC
@threadreaderapp unroll please
