Winklevoss Twins Establish A Crypto-Focused Self-Regulatory Body
Most recently, the member roster expanded to include the Bitstamp, bitFlyer USA, Gemini Trust Company, and Bittrex. These four exchanges have formed the Virtual Commodity Association Working Group, which intends to hold its inaugural meeting at a date that is yet to be determined.
Topics that are confirmed to be on the agenda for the first meeting include:
- Guidelines for handling member conflicts of interest, client communications, client disclosures, and record keeping.
- Initial staffing of the Virtual Commodity Association, including the possible selection of a permanent Executive Director and board of directors.
- Guidelines for Virtual Commodity Association members.
- Guidelines for best practices in fairness, risk management, transparency, and liquidity in cryptocurrency marketplaces.
Senior officials among the member exchanges stressed the need to develop industry standards as part of a path to demonstrating to government regulators that cryptocurrency and blockchain-focused companies are capable of operating in an honest manner. For example, John Roth, Chief Compliance and Ethics Officer at Bittrex, said:
“The blockchain industry must focus on protecting its customers and operating in a responsible manner to increase adoption globally. By working with the VCA, we can advance our shared goals of improving transparency, accountability and security across all virtual currency trading platforms. This effort will also complement our discussions with regulators and legislators about developing a long-term solution that creates a fully-compliant environment for blockchain while encouraging innovation, economic growth, and U.S. leadership in the industry.”
Communication Between Cryptocurrency Insiders & Regulators Are Still an Issue
Maria Filipakis currently serves as the interim executive director of the Virtual Commodity Association. She is best known for helping to formulate New York State’s BitLicense, which demonstrates not only the necessity of educating regulators about cryptocurrencies and the issues surrounding them, but also of the need for regulators who are willing to listen and understand the needs of the cryptocurrency space.
However, the BitLicense has often been criticized as a barrier which has prevented cryptocurrency entrepreneurs from establishing operations in New York.
For all regulators’ claims that they want to listen, it is not always easy to convince lawmakers to even bother trying to comprehend cryptocurrencies once their minds are made up.
For instance, Congressman Brad Sherman (Democrat-California) called for a complete ban on cryptocurrency mining and trading activities at a recent House of Representatives Financial Services Committee subcommittee hearing regarding cryptocurrencies.
On the flip side, regulators such as the CFTC’s Brian Quintenz have been complimentary of the member exchanges’ attempt to self-regulate the crypto-sphere.
“Given the absence of any federal oversight jurisdiction in the cryptocurrency market… I called on the cryptocurrency platform community to come together and develop a self-regulatory organization-like entity that could develop and enforce rules,” Quintenz said.
The Virtual Commodity Association may be a good start in the direction of reassuring regulators that exchanges are willing to operate ethically. Although. the newly-established association hasn’t yet indicated willingness to reassure investors that the selection of one of BitLicense’s architects as interim director is not a signal that it will ignore their needs in favor of making regulators heavy-handed. This may impact Bitcoin’s price for the time being, by driving away investors that value the ability to work with exchanges that will listen to their needs and concerns, even as much as they may listen to regulators.