Increased regulatory scrutiny of Fintech in Commodities Trading may impact Smart Contracts and Cryptocurrencies significantly

Back in October 2018, Brian Quintenz, the commissioner of CFTC, in a speech in Dubai, questioned the use of smart contracts in Commodities Futures Trading within the CFTC’s jurisdiction asking: "is the method by which it is being transacted on the blockchain compliant with CFTC regulations? If the contract is a swap, is it being offered to retail participants? Is it a product that must be traded on an exchange? Does the protocol itself perform exchange-like functions by facilitating trading, thereby potentially implicating registration requirements?". While the commissioner acknowledged that many smart contracts operate entirely outside of the CFTC’s jurisdiction, the open question was “if a smart contract is violative of CFTC regulation, then who is subject to an enforcement action?” The answer, implicitly holds the developers of the blockchain and the general users responsible, as they are typically unable to assess or police the legality of each application of the blockchain. In 2018, the CFTC had issued a primer on understanding smart contracts and their potential use cases.

Similarly, Congressional scrutiny of cryptocurrencies is increasing regulatory pressure on stablecoins and other cryptocurrencies and have the potential to destabilize the global monetary system In an interview with Bloomberg in August 2021, John Paulson predicted that “Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero.”. The selloff in Bitcoin on January 5th, 2022 as the Fed and other central banks pare back on excess-liquidity measures and prime the markets for higher rates in 2022 points to a vindication of Mr. Paulson's pediction. Barron's highlighted the selloff as another sign that Bitcoin is acting more like a tech stock than an inflation-fighting store of value–or digital gold, as its proponents argue.