Four cryptocurrency exchanges – Bittrex, bitFlyer USA, Bitstamp and Gemini – founded by the Winklevoss brothers are teaming up to form a new self-regulatory organization (SRO) dubbed the Virtual Commodity Association in order to help formulate new industry standards.
Why this matters for the Blockchain space
Declining prices and increasing regulatory pressure have slowed down the crypto market in recent times, and The Virtual Commodities Association intends to combat this downturn by working toward the goal of establishing an industry-sponsored, self-regulatory organization for the U.S. virtual currency industry, specifically in virtual commodity marketplaces.
According to the VCA’s website, the Commodity Futures Trading Commission (CFTC), which has legal jurisdiction over commodities such as bitcoin and ethereum is empowered to regulate fraud or market manipulation but does not necessarily have jurisdiction over the cash and spot markets which is derived from commodities.
Hence, to execute and maintain industry standards, the VCA will make use of a Board structure which would include a specified number of independent directors. They also mentioned that the primary function of the Board will be to facilitate the goals and mission of the VCA including the issuance of reports regarding the standards set forth by the VCA.
Self-reliance within the VCA
Cameron Winklevoss explained in a Medium post on Monday, “In keeping with our mission to build the future of money and our belief in the importance of thoughtful regulation in the virtual currency industry, we have decided to join the Virtual Commodity Association working group. We believe adding a layer of oversight on virtual commodity cash markets, in the form of self-regulation, is important for consumer protection and to ensure the integrity of these markets.”
Former executive director at the New York Department of Financial Services, Maria Filipakis will serve as its first executive director. Filipakis was instrumental in drafting the virtual currency regulations known as the BitLicense. “I applaud the VCA and its members in their commitment to strengthen the digital asset industry’s regulatory landscape, rules for the protection of customers, and bring forth industry setting best practices and market transparency,” Filipakis said in a statement.
The VCA also invited readers of the press release to share the following quote on Twitter: “We believe in the value of self-regulation, which we pursued in Europe almost from our inception, and look forward to following a similar path in the U.S. Those that can’t or won’t comply with regulations put consumers – and their own operations – at risk.”
Enabling consumer protection and forging better relationships with governmental regulators is vital for the industry and member exchanges believe that the new group can achieve just that.
Positive Criticism from the Industry
John Roth, chief compliance and ethics officer at Bittrex said that “The blockchain industry must focus on protecting its customers and operating in a responsible manner to significantly increase adoption globally,” he added that the VCA will “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.”
The group’s website stresses that it will function as an independent non-profit group that ‘will not operate any trading markets, that it will not serve as a trade association, that it will not provide regulatory programs for security tokens or security token platforms and that it will help set adopt best practice standards’
An inaugural working group meeting is slated to take place in September to address :
- Guidelines for membership in the VCA.
- Guidelines for best practices and rules-based marketplaces that will promote fairness, transparency, risk management, and liquidity.
- Guidelines for best practices that will address Member conflicts of interest, client communications, client disclosures, and record keeping.
- Staffing the VCA, to include an Executive Director, among others, and composition of the Board of Directors.
“Given the absence of federal oversight jurisdiction in the crypto market, in February and again in March of this year I called on the crypto platform community to come together and develop a self-regulatory organization-like entity that could develop and enforce rules,” Brian Quintenz, a CFTC commissioner, said in a statement. “Today’s announcement is a positive step towards that realization.”
Hopefully, the VCA can help the acceptance and adoption of cryptocurrencies within mainstream finance sectors through such initiatives.