The Commodity Futures Trading Commission’s LabCFTC recently released “A CFTC Primer on Smart Contracts” as part of LabCFTC’s effort to engage with innovators and market participants on a range of financial technology (FinTech) topics.

The Primer offers a clear and concise explanation of “smart contracts” and their potential impact on the CFTC’s mission to foster open, transparent, competitive, and financially sound futures and derivatives markets.

The easy-to-read primer format presents a simplified and entirely comprehensible definition of smart contracts including an overview of their history, characteristics, and potential applications. The primer also utilizes graphics to demonstrate how “early self-executing software logic [is] evolving into current smart contract technology – for example, starting with a simple vending machine illustration and then discussing more complex examples, including credit default swap contracts.”

The primer notes that “it is intended to be an educational tool regarding emerging FinTech innovations” and that LabCFTC cannot and will not provide legal advice. That being said, the charts, diagrams, and use case examples set forth a highly useful discussion of smart contracts, what they are, where they came from– as well as their potential benefits and challenges.

Launched in May 2017, LabCFTC is dedicated to facilitating market-enhancing financial technology (FinTech) innovation, informing policy, and ensuring the agency has the regulatory and technological tools and understanding to keep pace with changing markets. While LabCFTC is designed to make the CFTC more accessible to FinTech innovators, it also is intended to inform the Commission’s understanding of emerging technologies.

If its latest primer is any indication, LabCFTC is well on its way to enable “the CFTC to be proactive and forward-thinking as FinTech applications continue to develop, and to help identify related regulatory opportunities, challenges, and, risks.”

In describing the “Character of Smart Contracts”, the primer states that the “’Smart Contract’ may be an oxymoron” since it is not necessarily “smart” and may not be a “legally binding contract.”

The “Smart Contracts” primer, on the other hand, appears to be a very smart way for the CFTC to facilitate market-enhancing financial technology innovation.

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