The chairman of the US regulatory authority CFTC has called for the introduction of a “principles-based regulation” for crypto currencies.
Heath Tarbert, appointed in July 2019 to succeed former Chairman J. Christopher Giancarlo, stated that such an approach to the regulation of digital assets would enable development and monitoring. Then it might be appropriate to introduce more targeted rules. Tarbert has thus commented on crypto regulation in an opinion article published on the CFTC website on 19 November.
In the statement, Tarbert stressed that the term “principle-based regulation” did not mean approaching the issue superficially or deregulating it. This is indeed “far from it”. The Chairman explained that such an approach would not be based on detailed rules but rather on high-level and “broad principles” to set standards for regulated companies and products.
“If you set up 10,000 regulations, you destroy any respect for the law”.
To make his point clear, Tarbert quoted former British Prime Minister Winston Churchill: “If you draft 10,000 regulations, you destroy any respect for the law.”
According to the Chairman, regulators should first fully identify the consequences and potential risks associated with digital assets before setting rules. “We certainly don’t want to be too strict and nip innovation in the bud,” Tarbert said. He said:
“Given the rapid growth of innovation and the markets behind it, an approach based on principles in the regulation of digital assets and other Fintech products would allow development and monitoring. Once we have fully identified the consequences and potential risks associated with digital assets, we may need to adopt tailor-made and targeted rules or a more balanced combination of principles and rules.
Willingness to innovate does not mean tolerance of fraud
While Tarbert has been supportive of the development of the new technology, he has also been very active in addressing the risks associated with this industry. “Our willingness to innovate should not be confused with a tolerance of fraudulent behavior or a superficial approach,” the manager said. According to Tarbert, digital assets are threatened by unique risks such as fraud and hacker attacks. Such attacks could lead to theft or loss.
He added that the CFTC was now examining how the fundamental aspects of principle-based regulation could be applied to crypto exchanges and clearing houses.
Former CFTC Chairman: Main thing no damage by crypto
Tarbert’s positive comments about this industry recall the attitude of his predecessor Giancarlo. In September 2018, he argued that crypto should take an approach that focuses on avoiding any damage in order to grow. The industry was compared with the beginnings of the Internet.
At the end of October 2019, the Commission turned its Fintech research unit LabCFTC into an independent office. Since the promotion, the Fintech Centre has been reporting directly to Tarbert at the CFTC.