As large financial institutions partner with Fintech start-ups to test blockchain technology, it is no surprise that governments are also experimenting with blockchain to see any potential savings in transaction costs when clearing and settling payments. Recently, the national governments of Canada and the United Kingdom tested the technology. The Central Bank of Canada conducted a trial in conjunction with the New York based start-up R3 CEV, whereby banks received digital coins that represented the bank’s funds in an account at the Central Bank of Canada. Banks then exchanged the digital coins between themselves and the Central Bank through an Ethereum-based network. The UK government began an experiment using blockchain to distribute welfare payments in July of 2016, and even the State of Illinois established a working group in 2016 to explore how blockchain could increase efficiency.
Yet, as interest and investment in blockchain technology increases – one expert claimed blockchain startups received $1.4 billion in investment capital in the first nine months of 2016 alone – the Federal Reserve is still attempting “to understand” blockchain, and is, “paying close attention,” to the issue. This October, Federal Reserve Governor Lael Brainard stated the Federal Reserve would publish a research paper on blockchain later in 2016 and committed to continue to meet with public and private sector stakeholders to discuss the technology. The Federal Reserve has not, however, publicly stated its intention to conduct an experiment like that of the Central Bank of Canada.
Similarly, the CFTC and the SEC are investigating blockchain systems. In May 2016, CFTC Commissioner J. Christopher Giancarlo stated his belief that the CFTC should adopt a, “do no harm” approach to blockchain regulation while the SEC will host a Fintech Forum on November 14, 2016 and will dedicate the second panel to discussing blockchain technology.
Ziliak Law will continue its analysis on blockchain and will update this series as US government agencies release their findings and blockchain technology develops.
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