Blockchain could change the financial world during the global financial crisis in 2008.
This opinion was expressed by the Chairman of the US Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, speaking at the fourth annual DC Blockchain Summit in Washington. According to him, the use of the blockchain would change the response of the regulators at that time.
Recalling his personal experience as executive vice president of the brokerage services giant GFI Group, who in 2008 managed one of the world's largest trading platforms for credit default swaps (CDS), he spoke about panic and confusion on the GFI brokerage platform when global the credit crunch is out of control.
"I remember a call from a U.S. bank regulator asking about CDS trading exposure of several major banks, including Lehman Brothers. In fact, trading conditions were deteriorating by the hour. It was clear that the regulator had little means, short of telephone calls, to read all the danger signals that the CDS markets were broadcasting," he recalls.
According to Giancarlo, the blockchain technology would provide "transparency of real-time accounting of all regulated bidders" and prevent a "tangled manner" in which regulators fought to maintain orderly markets at the peak of a system failure.
Prior to real-time distributed ledgers, regulators were "forced to collect individual data to recreate complex, individual trading portfolios" manually, turning to brokerage firms such as GFI to collect market information, he said.
"What a difference it would have made a decade ago if blockchain technology had been the informational foundation of Wall Street's derivatives exposures. At a minimum, it would certainly have allowed for far prompter, better-informed, and more calibrated regulatory intervention instead of the disorganized response that unfortunately ensued," Giancarlo said.
It also noted that the blockchain, combined with modern cognitive computing capabilities, could allow regulators to quickly identify models and red flags signaling the risk of bankruptcy, such as anomalies in market trading activity and various counterparty risks.
Giancarlo's opinion on the blockchain's potential was also supported by the former vice president of investment in North America at JPMorgan Chase.