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CFTC’s ‘CryptoDad’ Chairman Giancarlo Views Cryptocurrency Boom As Part Of Larger Trend




J. Christopher Giancarlo’s recent speech at Vanderbilt University Law School underlined “the relevance of a principles-based approach to legal education” that is built into the architecture of decentralized networks of distributed wealth and power. He pointed out that millennials and Gen Z expect change to be “driven by technological disintermediation of distrusted institutions.”

It's easy to sound glib about trends. Identifying significant cultural topics and memes (not the pictorial ones with cats and big bold subtitles) is common for any aging generation as it observes the new guard; "those kids today" is a refrain heard throughout the ages. Recent complaints about avocado toast and selfie culture aside, what actually characterizes millennials and Gen Z best is the ease with which they discard old ideas for new, and by the complete readiness with which they are willing to set aside a dated theory or prejudice that doesn't work for something new that does. 

"CryptoDad" Sounds off

J. Christopher Giancarlo has come to be affectionately known as "CryptoDad" for his qualified acceptance of the trend of blockchain-based wealth management, atomized value stores, and the technologically bootstrapped ways of accounting for financial products. (Though he noted he is not a "virtual currency evangelist" per se.) So when he addressed an up-and-coming class of young lawyers at Vanderbilt's law school in Nashville, Tennessee, of which he is an alumnus, he took the opportunity to discuss the cultural landscape of wealth democratization and the practice of defending change and growth.

The chairman of the Commodity Futures Trading Commission (CFTC) accurately identified a trend among the youth of today and a challenge. He began his talk by posing the question of how the "transformational power of digital technology and accompanying social evolution" could be harnessed for the greater good by groups like the CFTC and the nascent legal community assembled before him. "The more I watched, the more I saw that the energy and momentum behind virtual currencies was not just driven by technological innovation. There was something else going on – something cultural."

Coming from an anecdotal perspective, he acknowledged that he approaches this issue as "a dad," and went on to detail what he had previously stated in a Senate hearing on virtual currency:

"I am the father of three college age children: a senior, a junior, and a freshman. During their high school years, we tried to interest them in financial markets. My wife and I set up small brokerage accounts with a few hundred dollars they could use to buy stocks. Yet, we haven't been able to pique their interest in the stock market. ... Something changed last year, however. Suddenly, they were all talking about Bitcoin." 

Also borrowed from the hearing were the obligations that Giancarlo feels his generation has in regard to the new:

  • "To respect their enthusiasm about virtual currencies with a thoughtful and balanced response, not a dismissive one.
  • To crack down hard on those who try to abuse their enthusiasm with fraud and manipulation.
  • To thoroughly educate ourselves – and the public – about this new innovation.
  • To make good policy choices and put in place sound regulatory frameworks to reduce risk for consumers."

A Class in History

Vanderbilt University's law department was still coalescing during the Gilded Age of the late 19th century, when financial titans were swinging their weight around Wall Street and regulation had not yet taken shape to control abuses of power. Wealth was grossly centralized to just a few barons of the oil, railroad, coal, and steel industries; teetering constructs of speculative financial products lined the pockets of the wealthy so that every social problem was said to be masked by a brittle layer of thin gold. The economy was shaping up for a momentous collapse. 

In looking at global patterns over time, a similar crisis was seen in 2008 – "the same crisis to which Bitcoin had emerged in response," Giancarlo pointed out. It could be said that we are again in such a position, with wealth enormously concentrated in the top 1 percent, while developing nations struggle to achieve a healthy market capitalization. The disparities seem very problematic to some; to those on the top, everything appears to be in good working order. But there is an essential injustice brewing, and a tipping point advancing.

So, Vanderbilt is a perfect place to position Giancarlo's thesis: that this new crop of lawyers and advocates should work for a more equitable means of managing wealth going forward, using the tools of technology and social justice. At any point when there is a great technological boom or large expansion of money and power, there is tremendous temptation for abuse, centralizing them in just a few unscrupulous hands, as was seen in the financial collapse of the Gilded Age. We now see the CFTC and Securities and Exchange Commission cracking down on bad actors mishandling the trust of hopeful investors

"Smart" Ghosts in the Shells

Giancarlo also addressed the need to redress malfeasance directly, saying cryptocurrency "is favored by advocates for the poor and unbanked, libertarians, pacifists, Occupy Wall Streeters, earnest tech geeks, economics buffs, long-term investors and many perhaps naïve but well-meaning young people." He highlighted the capabilities of distributed ledger activities combined with the use of blockchains' electronic distributed code contracts (aka "smart contracts") to encode the "good policy choices and … sound regulatory frameworks" he refers to in his bullet-pointed mandates to regulators: 

"I have seen how emerging technologies are impacting trading markets and the entire financial landscape with far-ranging implications for capital formation and risk transfer. They include machine learning and artificial intelligence, algorithm-based trading, data analytics, 'smart' contracts valuing themselves and calculating payments in real time, and distributed ledger technologies that may profoundly disrupt traditional market infrastructure."

Will we see an inevitable burst of a global wealth-disparity bubble caused by overspeculation and lack of regulatory balance? Possibly. That dystopian future of "Blade Runner" proportions could happen (probably sans the flying cars, at least in the short term … we'll settle for autonomous ones!), but Giancarlo's speech is a call to arms for a generation that's keen on equitability, the decentralization of power, and the democratization of wealth. 

The Good, the Bad, and the Future

Advocates for technological justice will have to remain vigilant. There will always be gamblers hustling at the saloon tables, with new kinds of gold up their sleeves; robber barons in the halls of power, and schemers looking to get rich quick. In a repositioning of the "code is law" refrain we've heard often, Giancarlo likened regulatory frameworks to software applications: "They are a set of rules and algorithms that direct action to certain desired ends. Often, they guide behavior toward a range of functions, tasks or activities determined to be in the public interest."

Giancarlo ended his address with the following:

"This is how a principles-based regulatory approach guides our response to market and technology evolution. It is part of the CFTC's historic DNA. It is part of keeping faith with [a] new generation of market participants. And it is part of keeping market regulation and oversight alive and vital. And, yes, I believe a principles-based education is the right course for a life in the law … This has been my experience as a Vanderbilt lawyer through a career spent amidst rapid technological change." ... Tonight, as a graduate of Vanderbilt Law School, I echo [the] words [and] memories of many extraordinary Vandy professors, who encouraged me to look to the future while drawing on enduring principles from the past."

What's new is the technology; what's always the same, for better or worse, is the people. Giancarlo and the CFTC show a prescient understanding of the challenges ahead, and seem likely to adapt to new technology to face those challenges. In the realms of both cultural development and technical innovation, ignorance and inflexibility are the enemy; Giancarlo stresses that the upcoming generation "see virtual currency – along with social media – as a means to bypass control by a failed generation of leadership."

It looks like cryptocurrencies and decentralized ledger technology are here to stay, just as thoroughly as corruption and reactionism dog every technological advancement; it will be the task of the new class of makers, hackers, regulators, and legislators to understand and defend them. Luckily, CryptoDad has their back.

Lucinda Michele Knapp

Lucinda Michele Knapp is a journalist with over fifteen years of experience covering tech, art, and culture in Los Angeles. Her articles have appeared in the Los Angeles Times, Variety, and Out Magazine among others. She spins fire, dispenses grammar advice, and knows kung fu.

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