Source: US Commodity Futures Trading Commission
Good evening, my lords, ladies and gentlemen. I would like to express my gratitude to Lord Taylor of Warwick and Dr. Lisa Cameron, as well as the Financial Club and the UK US Crypto Alliance, for this recognition at the Digital Assets Global Forum 100 Impact Leaders Dinner and Annual Awards and inviting me to provide remarks. Thank you also to Baroness Uddin and Lord Ranger, and especially to all the event staff at the House of Lords.
It is a great honor to receive this year’s Legacy Award, and a great privilege to share my views regarding innovation and market structure in financial services. Tonight’s event is a testament to the strength and longevity of the close relationships among UK and U.S. institutions, and the special relationship between our two great Nations.
Crypto and Digital Assets
In April, Treasury Secretary Bessent and Chancellor Reeves discussed digital asset regulation and laid the groundwork for our governments to explore ways “to support the use and responsible growth of digital assets.”
In the context of that discussion, I was pleased to learn that Chancellor Reeves acknowledged the importance of the UK-U.S. Financial Regulatory Working Group (FRWG), which I will discuss in a few minutes. Both the U.S. Commodity Futures Trading Commission (CFTC) and the UK Financial Conduct Authority (FCA) are members, and our agencies have partnered closely for decades.
The UK Government has moved quickly on cryptoasset regulatory proposals, including the FCA’s public consultation on various papers and publication of an FCA Crypto Roadmap.
So, I would like to highlight for you the CFTC’s swift progress on President Trump’s executive orders and policy agenda for digital assets.
For both our Nations, this is the light at the end of a very long tunnel, the dawn of a new golden age for market innovation, and the culmination of years of hard work by both the public and private sectors.
Responsible innovation and fair competition
While UK regulators have recently gained a secondary mandate on competition, the CFTC has long had a dual mandate to promote responsible innovation and fair competition in our markets.
Our dual mandate enshrines the simple truth that derivatives are financial instruments that are at the cutting edge of market innovation, and therefore our regulatory framework must be principles-based and flexible to adapt to new markets and new products.
Let me tell you about my personal journey towards ensuring that the CFTC remains not only the first, but also at the forefront, of leadership on digital asset markets.
The U.S. regulation of spot digital assets is a high priority for the CFTC because the largest digital asset markets are commodities.
It is also a high priority for me because I have worked on crypto and digital assets initiatives for over 10 years—since 2013, when I was staff at the CFTC and the Bitcoin Foundation came to Washington, DC to engage with regulators on responsible innovation.
That’s right—the crypto industry did not run away from regulation, they ran towards it, even in those early years, in hopes of finding a clear regulatory roadmap.
At that time, we at the CFTC thought that Bitcoin was a commodity. Two years later, in 2015, the CFTC made this view known publicly, and has maintained this view ever since as this novel asset class has expanded to include more tokens.
After my initial experience with crypto at the CFTC, I engaged on crypto again in the private sector.
I worked on Citi’s digital asset strategy, including product development and strategic equity and venture capital investments, and I worked on transactions, partnerships, vendors, and new clients.
I led digital assets global regulatory strategy and policy advocacy and initiatives to implement governance, risk, and control frameworks and compliance policies and procedures. That included leading global engagement in supervisory examinations of distributed ledger technology (DLT or blockchain) and digital assets by both U.S. and non-U.S. regulators—including the FCA.
Based on my hands-on experience, when I became a CFTC Commissioner, I knew providing regulatory clarity for digital assets had to be a priority.
I first proposed 10 fundamentals for responsible digital asset markets, which could be universally applied in any jurisdiction, in 2022. Then, I proposed a CFTC digital asset markets pilot program as a U.S. regulatory sandbox in 2023. I was gratified to be named to CoinDesk’s Most Influential 2023 list for these efforts.
Last year, in 2024, the Digital Asset Markets Subcommittee of the CFTC’s Global Markets Advisory Committee (GMAC), which I sponsor, developed and made two recommendations to the Commission: (1) a U.S. digital asset taxonomy and (2) regulatory treatment of tokenized non-cash collateral.
I want to thank the firms—many in this audience—from the largest banks and asset managers, to exchanges and clearinghouses, to crypto native startups, who have contributed to the GMAC’s efforts and graciously provided their time and resources to create a consensus view across both traditional and digital asset markets.
These recommendations for industry standards reflect years of thoughtful, disciplined work from the actual builders in this space who are the industry leaders.
It’s a common global solution that works for everyone, and also includes input from both international standard setters and non-U.S. regulatory authorities.
A golden age for market innovation
This year, in the Trump Administration’s first 100 days, the CFTC has taken decisive action to implement these prior proposals and promote a pro-innovation, pro-growth approach for digital assets.
The CFTC is a member of the President’s Working Group on Digital Asset Markets, which is expected to release a report next month that will be the Administration’s crypto roadmap. We have been working closely with the U.S. Treasury Department, the SEC, and other agencies on this productive and fruitful effort.
In February, I hosted a first-ever Crypto CEO Forum and participated in the groundbreaking White House Digital Assets Summit.
The CFTC has withdrawn outdated staff advisories and released new guidance to improve regulatory clarity for American and other innovators and entrepreneurs in crypto and digital assets.
We have had discussions on a digital asset markets pilot program and will soon participate as an observer in industry tokenization initiatives.
And, the CFTC recently completed a public comment period on 24/7 trading and perpetual derivatives, two crypto market innovations that may have implications for other asset classes with sufficient liquidity. Perpetual derivatives have been trading live on CFTC-registered designated contract markets (DCMs) since April, and 24/7 trading has been live since May.
The CFTC has provided technical assistance to Congress on various digital asset legislative proposals, including the CLARITY Act, and stands ready to carry out our mission if our jurisdiction is expanded. The future is bright.
Looking ahead, the U.S. must have a durable and flexible approach to regulation that will keep up with continuing innovation and stand the test of time.
Lessons learned
I appreciate Lord Taylor’s remarks about learning from the past. I will share some lessons learned from my experience at the CFTC and in the private sector with implementing the Dodd-Frank Act, the last time the U.S. enacted legislation that dramatically reshaped market structure.
The CFTC’s implementation of Dodd-Frank with our swaps regulations had far-reaching unintended consequences. Fifteen years later, the CFTC is still working to eliminate unworkable, overly burdensome requirements and resolve regulatory overreach that have significantly increased costs for all market participants with no meaningful benefits.
There are two key lessons learned, and we must not repeat the mistakes of the past.
Regulatory moat
First, Dodd-Frank’s duplicative, costly, and unnecessary regulatory requirements that cost billions of dollars annually for registration, compliance, and reporting—in addition to enforcement penalties that have become a tax on doing business—have resulted in a regulatory moat that is a barrier to entry for smaller firms, startups, and entrepreneurs.
This has led to anti-competitive effects and consolidation and concentration of market participants, because only the biggest firms can afford the overhead.
Any mandate or issuance of new regulations by the CFTC should leverage our existing registration categories and compliance requirements to avoid piling on with another layer of overregulation that has no benefit to market integrity or customer protection.
Market fragmentation
Second, Dodd-Frank’s jurisdictional overreach and the CFTC’s initial approach to cross-border activity resulted in swaps market fragmentation. These effects were especially profound in London and New York, the most important trading hubs.
A lack of harmonization based on principles of international comity, mutual recognition, and regulatory coherence led to fractured market liquidity that is less resilient to market shock or dislocation, increasing both market volatility and systemic risk.
Market fragmentation also resulted in increased complexity and costs for international financial institutions and other market participants’ legal entity strategy, booking models, and other operational processes. Increasing complexity increases both financial and non-financial risks.
Again, fifteen years later, the CFTC still has not completed implementing a substituted compliance regime across all CFTC swaps regulation.
Most of the CFTC’s over 20 staff letters, advisories, or other guidance issued since January under my leadership as acting Chairman have been to fix remaining Dodd-Frank issues based on my experience as an operating executive.
Because crypto and digital asset markets are borderless by design, it is imperative that the CFTC’s policy approach ensures that substituted compliance will be available from the start for entities that are properly registered in their home country jurisdictions that have comparable regulatory schemes, and that reciprocal mutual recognition for CFTC-registered entities is available as well.
The close partnership between UK and U.S. authorities can help to achieve this regulatory coherence. By leveraging existing registration categories and cross-border substituted compliance or mutual recognition, the CFTC and our non-U.S. regulatory counterparts would not have to reinvent the wheel and further delay growth and progress for digital asset markets.
Our current CFTC regulated entities could begin trading crypto on day one, and bring previously offshore activity back onshore to the U.S. with no negative impact to depth of market liquidity.
Simplicity is the solution
I have encouraged technology-neutral regulations that do not have to be continually rewritten to keep up with innovation, and activity-based regulations that do not require burdensome and costly entity-registration requirements that stifle competition by raising the gate to new entrants with less capital (namely, start-ups and entrepreneurs).
It is critical that once further regulatory clarity is provided, including through interpretations and exemptions, that the CFTC is prepared to move quickly rather than waiting to complete the 4 to 5 year process to develop and adopt additional digital asset regulations, for the crypto and financial sector to then spend even more years to implement.
The regulatory burn rate and the costs of missing out on market share are real.
A simple approach that can be completed in 12 to 18 months is the fastest way to ensure that the U.S. is no longer left behind when it comes to promoting innovation and welcoming American entrepreneurs and companies to come back home.
This is how we ensure U.S. competitiveness and that the U.S. leads the way in harnessing the potential of this new technology to create economic opportunities for all Americans. This is how the U.S. becomes the crypto capital of the world.
UK and U.S. Relationship
In the FinTech and digital-assets space, the CFTC’s coordination with our UK counterparts has enabled us to navigate the rapidly changing landscape, mitigate risks, and advance responsible innovation. I especially want to recognize our close cooperation with the FCA in this regard.
In 2018, the CFTC and the FCA signed a FinTech Innovation Arrangement wherein we each committed to collaborate and support innovative firms through our respective financial technology initiatives.
CFTC staff members have also benefitted from participating with their UK peers and other regulatory partners in the Financial Innovation Partnership, which is a dialogue like the FRWG, designed to focus on facilitating our mutual engagement in financial innovation.
In other areas of financial services oversight, we have a long and deep history of collaboration.
These long-standing examples serve as a formidable blueprint for successful collaboration going forward regarding digital-assets, decentralized finance, and artificial intelligence (AI):
In 1986, the CFTC and the Securities and Exchange Commission (SEC) signed a memorandum of understanding with the UK Department of Trade and Industry, now succeeded by the FCA.
In 1989, the CFTC included the UK among the first exemptions issued under Rule 30.10 (allowing UK firms to serve as futures brokers for U.S. customers on UK exchanges without having to register as brokers in the U.S.). Many UK firms still avail themselves of this 30.10 relief.
In 1991, we signed a memorandum of understanding amongst the CFTC, SEC, the then Department of Trade and Industry, and the Securities and Investments Board (the latter two succeeded by the FCA, the Prudential Regulation Authority, and the Bank of England) on mutual assistance and the exchange of information.
In 2009, the CFTC and the Bank of England executed a memorandum of understanding on Central Counterparty Clearing House (CCP) supervision.
In 2020, the CFTC revised that clearing memorandum of understanding with the Bank of England to reflect the cooperation and exchange of information in the supervision and oversight of CCPs that operate on a cross-border basis in the U.S. and UK.
In the Spring of 2023, the CFTC and Bank of England announced a further strengthening of our commitment to close cooperation and mutual understandings on the supervision of CCPs.
Later in 2023, the UK Parliament published its CCP equivalence decision for the CFTC. This was an important milestone in our mutual deferential approach to supervision because it highlights our strong cooperation and allows greater cross-border access for our regulated entities.
Each of these achievements have been possible because we have a relationship based on trust and mutual respect.
Since the financial crisis and global derivatives regulatory reform, the CFTC directly regulates the largest UK banks as swap dealers, and much hard work has gone into establishing a substituted compliance and mutual recognition regime. I’m pleased to have furthered these efforts under my chairmanship as well.
The UK-U.S. Financial Regulatory Working Group
During the most recent FRWG meeting, representatives of our finance ministries, markets regulators, and prudential authorities discussed the strong current of innovation evident in our jurisdictions as well as the means to collaborate on a foundational framework in the areas of digital-assets and AI.
Our respective delegations provided updates on proposed legislation to regulate digital assets, including stablecoin. UK participants also noted that you have updated your Digital Securities Sandbox and are building on recent discussions between the Chancellor and the U.S. Treasury Secretary.
Importantly, the FRWG also discussed exploring potential opportunities to support cross-border innovation. Participants emphasized the importance of effective regulation in promoting economic growth while also addressing risks and continued bilateral and international engagement within the sector and amongst authorities.
In that regard, FRWG representatives also exchanged views on their respective approaches to AI and both current and future AI use cases within financial services. U.S. and UK authorities discussed means to work together, including as appropriate through international standard-setting and coordination institutions, to realize the potential of this technology and address the risks of AI in financial services.
Conclusion
During my chairmanship and as a commissioner, I have tirelessly advocated for a level playing field for global businesses and access to markets. Relationships—especially special ones like ours, the UK and the U.S.—make this possible.
Through my work with the CFTC’s GMAC and engagement with international standard-setters like the Financial Stability Board (FSB), Bank for International Settlements (BIS) and the Basel Committee for Banking Supervision (BCBS), the International Organization of Securities Commissions (IOSCO), and the Organization for Economic Co-operation and Development (OECD), and my bilateral relationships with nearly two dozen of the CFTC’s regulatory counterparts around the world, I believe that we can achieve shared prosperity through economic growth and the engine of capital markets.
As our Nations continue to forge ahead with our pro-innovation agendas through our multiple regulatory initiatives, our markets will be well-served by our continued cooperation.
Thank you.
MIL OSI USA News –
