US Regulators Recommend Oversight for Bitcoin and Distributed Ledgers

By June 22, 2016Bitcoin Business

A major financial oversight body within the US government created in the wake of the financial crisis has identified bitcoin and distributed ledger systems in general as a potential systemic risk.

The Financial Stability Oversight Committee (FSOC) said in the new report released yesterday that the technology represented an innovation that “appear[s] poised for substantial near-term growth” and that it is reflective of a shifting landscape that merits attention from regulators.

As a broad recommendation, the committee said that regulators should prepare to adjust accordingly if the technology sees broader adoption or outright supplants certain market intermediaries. The issues identified focus on the lack of experience with these systems among participants in financial markets, exposing them to operational and fraud risks.

Beyond that, the FSOC said that the global nature of the technology – and the fact that it transcends legal jurisdictions and national boundaries – will potentially require regulatory cooperation on a similar scale.

The report notes: "Furthermore, since the set of market participants which makes use of a distributed ledger system may well span regulatory jurisdictions or national boundaries, a considerable degree of coordination among regulators may be required to effectively identify and address risks associated with distributed ledger systems." The FSOC was created with the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which was drafted in response to the 2008-09 financial crisis. Signed into law in 2010, the bill was a controversial one, and to this day draws arguments that it either regulates the financial system too much or not enough.

The committee itself was given a broad mandate to investigate possible systemic risks, and according to the law, is empowered to designate market issues and take action against activities or market participants it deems an immediate risk to the US financial system.

The FSOC is currently chaired […]

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