US financial regulator: Blockchain smart contracts subject to existing laws

posted 5 months ago
One of the top US financial regulators, the Commodity Futures Trading Commission (CFTC), has released its 2nd guide to understanding smart contracts, which is a reminder that the technology is covered under financial rules. Part of agency’s fintech initiative, & described as an “educational tool” rather than official policy, it covers the basics of blockchain smart contracts including their history, characteristics, case studies, potential use cases and perceived risks.

Stating that the concept of a smart contract was discovered some 20 years ago by computer scientist Nick Szabo, the CFTC states that the self-executing programs are only as smart as the “information feed it receives and the machine code that directs it.” The agency says that smart contracts can offer the benefits of reduced costs and transaction times, lowered counterparty and settlement risks, and increased security. At the same time, though, they present challenges, including operational, technical and cybersecurity risks, alongside the potential for fraud, manipulation, reduced transparency and accountability. On the topic of regulation, the CFTC said that smart contracts are subject to existing laws.
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