The Commodity Futures Trading Commission (CFTC) has debuted an Innovation Task Force (ITF) on Tuesday. The newly formed unit will essentially work on modernizing regulations to better envelop emerging sectors like cryptocurrencies, Artificial Intelligence (AI), and prediction markets.
Michael Selig, the chairperson of the CFTC, announced the Task Force on Tuesday. The unit will work in partnership with the Innovation Advisory Committee to design clear regulatory oversight over the mentioned sectors.
As per Selig, clear rules will encourage American innovation to thrive on its home ground, preventing an exodus of talent.
“We can ensure American market participants are not left on the sidelines by establishing a clear regulatory framework for innovators building on the new frontier of finance,” Selig said in his statement.
Michael Passalacqua, senior advisor on crypto and AI to Selig and the CFTC has been selected to lead the task force.
“Under Chairman Selig, the ITF will provide clarity to builders by advancing CFTC’s innovation agenda across crypto, AI, & PMs,” Passalacqua said, expressing gratitude for his appointment as the head of the task force.
In the U.S., the CFTC is responsible for regulating the derivatives markets and protecting market participants against frauds and financial risks.
The CFTC views crypto and prediction markets as “digital commodities” and “event contracts”. By this classification, related multi-billion dollar derivatives like futures and binary swaps involving crypto and facilitated on prediction markets fall under federal oversight.
As far as AI is concerned, the CFTC sees it as the engine that would power modern finance, nudging the agency to institutionalize healthy practices with the technology that would work in the favour of the markets.
The U.S. Securities and Exchange Commission (SEC) already has a Crypto Task Force that is working to formulate legislations to oversee crypto development in the country.
As per the CFTC, its ITF will work closely with SEC’s Crypto Task Force to ensure that both, the CFTC and the SEC are on the same page in terms of their approaches on regulating these up and coming sectors.
The formation of the IFT comes in the backdrop of the U.S. still awaiting the passing of its CLARITY Act, also known as the crypto market structure bill. The proposed bill intends to expand CFTC’s power to make it the primary regulator for the crypto spot market, leaving SEC as the gatekeeper for crypto assets that work as traditional investment assets.
The CLARITY Act is still under discussion in the U.S. and the exact timeline for its passage remains unclear for now. In February, Senator Bernie Moreno from Ohio did say that the final negotiations around the CLARITY Act could be wrapped up by April.