The Illinois Department of Financial and Professional Regulation (IDFPR) has become the first U.S. regulator to join R3’s blockchain consortium. With regulators around the world keeping their eyes on both the fintech sector and blockchain technology, the IDFPR’s involvement with R3 should help it better understand the risks and rewards of emerging technologies.
By joining R3, the IDFPR will be able to work closely with members from around 80 financial institutions that are working to develop blockchain-based solutions. R3 members are generally focused on providing secure and scalable technologies to the finance sector and hope to change the way industry processes are run.
Blockchain technology can bring ample efficiency to the daily operations of finance companies by streamlining back-office processes. Nevertheless, as it’s a new technology, regulators have been slow to proffer directives. Bryan Schneider, Secretary of the IDFPR, said:
“As Illinois’ financial regulator, we are committed to embracing the potential that distributed ledger technologies bring to our financial institutions. Its potential to dramatically lower transactional costs, automate manual processes, and reduce opportunities for fraud and risk are truly promising. Through our collaboration with R3, we look to provide the support necessary to ensure the commercial and social viability of this emerging technology.”
The R3 consortium is stronger as a whole for adding a U.S. regulator to its member base. It already has the Bank of Canada and the Securities & Futures Commission of Hong Kong among its ranks; adding more diversity may prove to enhance decision-making.
Illinois, with its Chicago-based exchanges, is a global hub for derivatives trading, so the IDFPR is well accustomed to regulating major institutions. The statewide trend toward blockchain technology prompted the creation of the Illinois Blockchain Initiative in November, which is made up of state and county agencies working together to explore different use cases. As R3 has been attempting to grow the number of regulators and governmental organizations in its association, the Illinois regulator was a natural addition.