CFTC technology advisory committee discusses AI

Votes to approve report calling on the government to address risks in decentralized finance

8 January 2024


The US Commodity Futures Trading Commission held a meeting of the Technology Advisory Committee on 8 January to discuss several current policy issues affecting the derivatives industry.  

The meeting included two presentations from representatives from the White House and a report that calls on the government to address looming risks in decentralized finance. 

The advisory committee, which is sponsored by CFTC Commissioner Christy Goldsmith Romero, has no rulemaking authority, but it provides a platform for market participants and policy experts to give the agency their views on current issues.   

TAC votes to release a report on DeFi  

The TAC voted by a vote of 14 yes votes and five abstaining votes to release a report, drafted by a subgroup of its members. In her opening statement, Goldsmith Romero said she hopes that the report “will be used by policymakers and regulators as they consider DeFi going forward and also by the industry itself” and that “given that DeFi remains at the center of cyber hacks and illicit finance” she is “particularly grateful for the recommendations related to anti-money laundering and countering the financing of terrorism.”  

The report states that DeFi presents promising opportunities and complex, significant risks to the US financial system, consumers and national security. The report encourages government and industry to work together to better understand DeFi and advance its responsible development.  

The report contains a functional DeFi definition – Enterprises, projects, and ecosystems characterized by highly automated financial networks that have no single point of failure, do not rely on a single source of information, and are not governed by a central authority that is capable of altering or censoring this information in order to perform tasks central to delivery of one or more financial services.  

The report also contains a series of recommendations including calling on policymakers to determine whether and how DeFi systems fall within the existing regulatory perimeter, and whether the regulatory perimeter might need to be expanded.    

White House presentation about artificial intelligence 

Elizabeth Kelly, Special Assistant to the President, White House National Economic Council, gave a presentation on the  Executive Order on Artificial Intelligence issued by the White House last October.   

Kelly emphasized that the Executive Order aims to ensure that America leads the way to responsible AI innovation. The order follows the president’s directive to coordinate across all levels of the federal government.  The EO features eight guiding principles and themes: 

  • new standards for AI safety 

  • protecting Americans’ privacy 

  • advancing equity and civil rights 

  • standing up for consumers, patients, and students 

  • supporting workers 

  • promoting innovation and competition 

  • advancing American leadership abroad 

  • ensuring responsible and effective government use of AI 

The Executive Order encourages independent regulatory agencies, such as the CFTC, to consider using their authorities to address risks that may arise from the use of AI, including risks to financial stability.  

The Executive Order also calls on the National Institute of Standards and Technology develop guidelines and best practices—with the aim of promoting consensus industry standards—and testing environments, for developing and deploying safe, secure, and trustworthy AI safety and security.  

Goldsmith Romero asked the TAC’s Subcommittee on Emerging and Evolving Technology to consider whether to recommend that the CFTC impose best practices for AI, such as NIST’s Risk Management Framework, for regulated entities. 

White House presentation on cyber defenses  

Mitch Herckis, Branch Director for Federal Cybersecurity, Office of the Federal Chief Information Officer, White House, presented about the US government’s efforts to modernize federal cyber defenses. Herckis said that government frameworks are only as good as implemented by regulators and federal entities and encouraged the public and private sector to work together. Herckis emphasized the US’s Federal zero trust architecture (ZTA) strategy, which was unveiled by the White House Office of Management and Budget in January 2022 and requires agencies to meet specific cybersecurity standards and objectives by the end of Fiscal Year (FY) 2024. The foundational tenet of the zero trust strategy is that no actor, system, network, or service operating outside or within the security perimeter is trusted. Everything must be verified.  

The implication of artificial intelligence on financial markets 

Michael Wellman, Professor of Computer Science & Engineering, University of Michigan, highlighted in his presentation that AI is prevalent today in financial markets and this new technology has taken hold in increasing the speed and precision of activity in financial markets. A major focus of Wellman was focused on automated trading and he highlighted a paper he co-wrote titled ‘Ethical Issues for Autonomous Trading Agents’.  Wellman highlighted concerns about potential market manipulation at times but also opportunities to identify market manipulation as well. One problem Wellman identified is that any advance in detection of market manipulation by AI could lead to an AI manipulator learning to better evade detection.  

Wellman also noted that financial regulations generally proscribe market manipulation, which is often defined in terms of the intent behind market actions. If these actions are taken by autonomous AI agents, Wellman questioned if regulators need to determine who should be held accountable, or if there are regulatory gaps that must be addressed.  

Additional documents 


Decentralized Finance Report 

Opening Statement of Commissioner Christy Goldsmith Romero 

Statement of Commissioner Christy Goldsmith Romero About the DeFi Report 


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